Startup funding in India slows to $1.6 bn; 2 unicorns emerge in Q1

India’s startup funding experienced a slowdown in January-March period after continuous growth in the previous three quarters of 2023, raising $1.6 billion (until March 15, 2024), according to Tracxn’s latest ‘Geo Quarterly India Tech Report - Q1 2024’ report.

Funding in Q1 2024 was lower compared to the same period in 2021 and 2022, though the country secured the fourth-highest position globally in terms of funding raised during this period.

In the first quarter of the calendar year 2024, late-stage funding saw a major drop of over 46%, while early-stage funding witnessed a 28% increase.

Out of $1.6 billion in funding, Shadowfax and Credit Saison received the highest funding of over $100 million, with Capillary, Rentomojo, and Captain Fresh also being among the top-funded companies.

In Q1 CY24, two new unicorns —Perfios and Ola Krutrim— emerged, giving a boost to India’s tech landscape. Additionally, IPO numbers also surged, with 8 tech companies going public, including MediAssist, WTI, Exicom, and LawSikho, reflecting investor confidence in the sector. Only two companies had gone public in Q1 2023, showing the growing maturity of the Indian tech ecosystem.

Retail, fintech, and enterprise applications were the top-performing sectors in Q1 2024, with the retail sector receiving funding worth $494 million, a decline of 34% YoY.

Enterprise applications garnered $448 million in funding, a growth of 48% compared to $302 million received in the previous quarter, while fintech received $429 million in funding, a 48% growth from the last quarter's $289 million.

Tracxn says the investment growth in the fintech sector is propelled by the “rapid growth seen in smartphone penetration driving the cashless economy and other favourable regulatory policies”. This has helped the sector receive consistent investor interest.

Neha Singh, co-founder of Tracxn, said, "Despite the funding slowdown and economic fluctuations, India's tech startup ecosystem is still one of the top-performing tech ecosystems globally. Even with the slowdown seen in this quarter, we anticipate the bounce back quickly, propelled by government initiatives and a large consumer base comprising the world’s largest young population."

Overall, there were 20 acquisitions during the quarter, a 33% decrease from last quarter and a 55% drop compared to 45 acquisitions in Q1 2023. “Notable acquisitions included Pingsafe, a cloud security platform, which was acquired by SentinelOne, and Difenz, a fraud risk management platform, being acquired by Signzy.”

City-wise, Bengaluru emerged as the leader in total funds raised during Q1 2024, followed closely by Mumbai and Noida.

Venture Catalysts, We Founder Circle, and Titan Capital led the seed investments in Q1 2024, while Peak XV Partners, Saama Capital, and RTP Global were prominent in early-stage investments. Elev8, Epiq Capital Advisors, and UC-RNT Fund took the lead in the late-stage category this quarter.