Optimistic outlook: Half of VC investors foresee a rebound in start-up funding in 6-12 months

Fifty per cent of venture capital (VC) investors hold a positive outlook on the revival of start-up funding in the next 6-12 months, while 17 per cent expect the resurgence to occur much sooner, according to a survey by Redseer Strategy Consultants. The rest are of the opinion that it would take 12-18 months or more for the funding winter to pass.  

Expectations regarding funding patterns suggest that 2023 is likely to follow the trend seen between 2017 and 2020, with funding in the $12–15 billion range. In 2024, a bullish trend is expected, possibly reaching $15–20 billion, the report said. The number of deals, which dropped to 700–900 in early 2023 from 1,519 in 2022, is predicted to rise again in 2024 to 1,000–1,200 deals.  

As per PwC’s ‘Startup Deals Tracker—CY22’ report, Indian start-ups raised almost $24 billion in 2022, marking a 33 per cent decrease compared to CY21. Additionally, venture capitalists currently have more available funds than before. Private capital dry powder continued its decade-long growth streak and rose to a new record of $3.7 trillion in 2022, revealed a new report by Bain & Company. Buyout dry power was $1.1 trillion at the end of 2022, while growth fund dry powder was just under $350 billion.

Redseer projects this year’s deals to primarily be seed or early-stage, following the trend observed since CY17.  

According to Kanishka Mohan, a partner at Redseer, among the 1000+ start-ups assessed by the consultancy, there are 10 prominent emerging themes such as beauty and personal care (BPC), health and wellness, diagnostics and clinics, gaming and app studios, personal loans, customer relationship management (CRM), Industrial e-commerce business-to-business e-commerce market (eB2B), insurtech, DevOps, and finance. Redseer foresees these sectors as the breeding ground for the upcoming generation of unicorns as the decade progresses.

Over the past five years, India’s start-up ecosystem has experienced rapid maturation, according to the partner’s insights. The count of registered start-ups has surged by nine times in the last four years, growing from approximately 10,000 start-ups in CY18 to around 90,000 start-ups in CY22. Simultaneously, the number of active investors has doubled, growing from 400 investors in CY18 to approximately 900 investors in FY22. Notably, the expansion of investors within the country has been complemented by a more diverse range of global funding sources. Collectively, the USA, EU, UAE, and Japan constitute the largest contributors to funding for Indian start-ups, comprising 5 per cent of the total global funding and 20 per cent of the total APAC funding landscape.