Around 50% of investors believe that Modi 3.0 will have a positive impact on startups

In a survey conducted by Inc42, 46% of VC and angel investors said they believe that the 2024 Lok Sabha election results will boost overall investor confidence

Around 93% of investors surveyed said they see 2024 as a breakthrough year for the Indian startup ecosystem

This comes at a time when the Indian startup ecosystem continues to grapple with a funding winter, with funding remaining almost unchanged at $5.3 billion in the first half of 2024.

Most investors believe that the formation of the National Democratic Alliance (NDA) government led by Prime Minister Narendra Modi for the third consecutive time will have a positive impact on investor sentiment towards the Indian startup ecosystem.

In a study conducted by Inc42, 46% of venture capitalists (VC) and the angel investor participants stated that they believe The results of the 2024 Lok Sabha elections will boost overall investor confidence in the Indian startup ecosystem.

While 32% of participants said they believe the election will have no impact on investor sentiment, 18% said they are taking a wait-and-see approach to investing after the election. A small 4% of investors said they believe the election will lead to sectoral action.

However, it is important to note that the Indian startup ecosystem is still struggling through the funding winter. According to Inc42 Startup financing report for H1 2024‘, Indian startups have raised a total of $5.3 billion in the first half of 2024 (H1), down 1.8% compared to USD 5.4 billion in H1 2023. Meanwhile, the number of transactions secured in this half increased by 7% to 540 from 470 in the same period a year earlier.

However, investors are expecting a revival in funding in the second half of 2024. Earlier, 3one4 Capital founding partner and CFO Siddarth Pai told Inc42 that 2024 is expected to bring political turmoil across the globe. However, he said that investor uncertainty in India has reduced due to the political stability the country has achieved after the general elections this year.

Consistent with Pai’s views, about 93% of investors surveyed said they see 2024 as a breakthrough year for the Indian startup ecosystem. Only 7% of investors said they believe funding corrections will continue this year as well.

Notably, Finance Minister Nirmala Sitharaman presented the first Budget 3.0 of the Modi government on July 23. It came as a huge relief to the startup ecosystem that the Finance Minister fulfilled a long-standing demand by announcing abolition of the infamous angel tax.

She also announced 1000 Cr INR VC Fundto boost the country’s space economy. Besides, Sitharaman said the government is planning to set up e-commerce export hubs in a public-private partnership (PPP) model aimed at strengthening the position of SMEs and traditional craftsmen to sell their products on international markets

As per the study, investors are also optimistic about the PPP model and believe it can help certain sectors take a leap forward. Around 39% of investors surveyed by Inc42 believe that healthcare startups will benefit the most from increased public-private collaboration supported by the Indian government.

Meanwhile, 29% of investors believe that startups in the clean energy sector will benefit the most from this partnership. Financial inclusion, waste management and education were other sectors that featured in investor responses.