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Bengaluru: Only 46 per cent of Indian startup founders expect the funding environment to improve in 2024, as per a survey report published by tech association Nasscom in collaboration with management consulting firm Zinnov.
Improved funding and more public listings, along with a growth in profitability, are trends expected for the overall ecosystem this year, and the scenario looks especially promising for firms focused on deep tech solutions, as per Nasscom.
The previous year for startup funding was the worst in 5 years, where deal volumes dropped 48 per cent compared to 2022. The outlook for 2024 is comparatively better, the report stated.
Startup founders are banking on a better cash flow in 2024, with 60 per cent expecting a growth in revenue, the report said. This is in line with investors halting large value deals over the past year and urging new-age firms to focus on sustainable profitability and optimising expenditure over growth and valuation, especially for B2B tech startups.
Notably, a significant portion of unfunded tech start-up founders anticipate higher revenues in 2024 compared to their funded counterparts, the report said.
Overall, 750 startups received funding in 2023. 72 per cent of these were seed-stage deals, while late stage funding saw a significant drop, further highlighting changing investor strategies toward selective capital allocation to prefer profitable ideas as opposed to high valuation companies.
“India’s tech startup ecosystem has truly matured attracting more than $70 billion in cumulative funding between 2019 to 2023. This growth is now anchored in a strategic shift towards improving business metrics and revenue streams,” Debjani Ghosh, President nasscom said.
Last year, 14 per cent of the total funding received by startups was for deep tech solutions, and this is expected to continue following an upward trend in 2024 as companies across verticals look to automate operations and niche areas like SpaceTech and ClimateTech become more mainstream.
At the same time, existing firms are also looking to leverage emerging technologies, with nearly 70 per cent of startups investing in artificial intelligence to enhance product capabilities and internal efficiencies, along with reducing operational costs.
Several changes still need to be made to accelerate the ecosystem further, such as identifying key sectors for DeepTech investment, fostering an integrated approach for innovation, market connections, and support in areas like testing, patent filing, certifications, and training, the report said.
Bolstering domestic venture fund flow through innovation-focused programs, and easing regulatory compliance by adopting a pro-innovation, risk-based approach to AI regulation will also aid the DeepTech sector to grow, it added.