India’s economy is booming, so why are its start-ups finding it harder to get money to grow?
- Indian start-ups saw a steeper drop in funding in 2023 even as the country’s stock market surged 19 per cent since the beginning of last year
- Much of the blame for investors’ relative reticence towards start-ups can be laid at the sharp turnarounds in fortune for heavyweights like Paytm and Byju’s
Investors, once eager to pump in billions of dollars in promising Indian tech ventures, are now going slow and cutting smaller cheques. They’ve been burnt by ignominious falls from grace – and valuations – for once-marquee young firms or market debutants of recent years such as digital payment company Paytm.
Karthik Reddy, managing partner at India’s Blume Ventures, which has invested in hundreds of early-stage start-ups, said his firm plans to do about eight new deals this year compared with 12 last year. It will invest bigger sums in firms it is confident about instead of spreading funds across more companies.
“When your existing portfolio is not showing gains, it is hard to be excited to do more,” he said.
Investors looking at Indian start-ups are much more focused on potential profitability, less enamoured with tech companies and more interested in stable bricks-and-mortar businesses, according to interviews with six executives at foreign and domestic investment firms as well as two CEOs at start-ups.
In January and February, India’s start-ups raised about US$900 million – a pace that signals another slow year after a six-year low of just US$8 billion in 2023, Venture Intelligence data shows.