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Start-up funding winter will pass in 6–12 months, with 50 per cent of investors expecting the funding spring to return around this period, according to a report by Redseer.
India’s start-up ecosystem has matured rapidly in the last five years. The number of registered start-ups has grown 9X in the last four years, from about 10,000 start-ups in CY18 to about 90,000 in CY22.
At the same time, the number of active investors has grown 2X, from 400 investors in CY18 to about 900 investors as of FY22. Apart from the doubling of investors at home, global sources of funding have also become more diversified than before.
Largest funding sources
Additionally, the US, EU, UAE, and Japan are the largest sources of funding for Indian start-ups, making up 5 per cent of total global funding and 20 per cent of total APAC funding, Kanishka Mohan, a partner at Redseer Strategy Consultants, explained.
Although 50 per cent of investors surveyed by Redseer in June are positive that the funding spring would return in the next 6–12 months, 17 per cent of respondents thought it would happen sooner. The rest believe it will be 12–18 months or more before the funding freeze passes.
The expectation with funding patterns so far is that 2023 will revert to the long-term trends in line with the years CY17 to CY20, and hover between $12 billion and $15 billion, beyond which it is expected to be bullish into CY24 and touch $15–20 billion.
Funding deals
The number of funding deals, which dropped early in CY23 to 700–900 deals from 1,519 in CY22, is also expected to shoot back in CY24 to 1,000–1,200 deals. Moreover, VCs today have more dry powder than ever; also signalling a positive outlook is the total number of deals this year, 90 per cent of which are likely to be seed, or early-stage deals similar in trend to what was seen since CY17, Mohan added.
Of the more than 1,000 start-ups evaluated by Redseer, 10 themes stand out, including BPC, health & wellness, diagnostics & clinics, gaming & app studios, personal loans, CRO/CRM, industrial eB2B, Insurtech, DevOps, and finance. These sectors will give rise to the next set of unicorns going further into the decade.
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