Indian startup funding doubles year-on-year to $3.4 billion in Q3 2024

ABSTRACT

The total number of transactions increased to 262 in the third quarter of 2024, an increase of almost 28% compared to the 205 transactions that were completed in the year-ago period

After a prolonged financial winter, the number of megadeals increased to 10 in September 2024 from three in the third quarter of 2023 and four in the third quarter of 2022.

The fintech sector continues to enjoy maximum investor interest, with fintech startups raising $677 million across 45 deals in the third quarter of 2024.

After almost two years of drought, the Indian startup ecosystem is showing signs of the arrival of funding spring. Total funds raised by homegrown startups doubled year-on-year (YoY) to $3.4 billion in the third quarter (Q3) of calendar year 2024 (CY24).

Indian startups raised around $1.7 billion in the same period last year and nearly $3 billion in the third quarter of this year.

The total number of transactions increased to 262 in September 2024, an increase of almost 28% compared to the 205 transactions that were completed in the third quarter of 2023.

According to Inc42’s Indian Tech Startup Funding Report, Q3 2024, the median deal check size increased 142% to $2.9 million in Q3 2024 from $1.2 million in the year-ago period, reflecting growing investor confidence in the Indian startup ecosystem.

Funding raised by Indian startups in the quarter under review was 10% higher than $3.1 billion in Q2 2024 and 55% higher compared to $2.2 billion in Q1 2024.

However, the number of mergers and acquisitions fell by 33% year-on-year to 18 in the third quarter of this year.

Mega deals are back with a bang

After a prolonged financing winter, the number of megadeals – financing rounds valued at more than $100 million – increased to 10 in September 2024 from three in the third quarter of 2023 and four in the third quarter of 2022.

The number of mega deals in June and March 2024 was four and three, respectively.

Startups like Zepto, PhysicsWallah, and Rapido led the way when it came to big deals in Q3 2024.

Amid the high-speed trading boom, Zepto raised its second mega round this year in August, raising $340 million from brand investors such as Lightspeed Venture Partners, General Catalyst and Dragon Fund, among others. The funding round came just two months after the startup launched raised $665 million at a valuation of $1.4 billion.

At a time when edtech startups are facing challenging financial conditions amid BYJU’S’s woes, Alakh Pandey-led PhysicsWallah raised $210 million in a round led by Hornbill Capital in September.

He brought Major Rapido last month became a unicorn after raising $200 million in Series E financing round led by WestBridge Capital.

Other notable deals struck during the quarter included funding rounds from hospitality major OYO and electric two-wheeler maker Ather Energy, which has submitted draft documents to market regulator SEBI for its INR 3,100 Initial Public Offering (IPO)..

In addition to Rapido, Ather Energy and Moneyview joined the unicorn club in September. The world’s third-largest startup ecosystem has already minted six unicorns in the first nine months of 2024 compared to just two unicorns in all of 2023.

Generally speaking, funds raised by Indian startups approached the level of USD 9 billion in the first nine months of 2024. Since the beginning of this year, Indian startups have raised a total of $8.7 billion compared to $7.2 billion raised in all of 2023.

Seeds, growth, late stage investment rebound

In line with general financing trends, startups at individual stages recorded an increase in capital raised in September.

Startups in the seed phase raised funds worth $360 million in the third quarter of 2024, which is a jump of as much as 126% compared to $159 million in the same period a year ago. However, the number of deals decreased by 3% y/y to 125 at the seed stage. Nutrix AI’s $27.5 million financing round and Centricity’s $20 million financing round were among the largest seed-stage deals in the quarter.

Growth-stage startups secured $847 million in funding in Q3 2024, up 91% from $443 million in the prior-year quarter. During the quarter, investors placed 65 bets on growth-stage startups, an increase of 103% compared to 32 in the third quarter of this year. Notable deals included Everest Fleet’s $30 million funding round and Redcliffe Labs’ $42 million round.

Meanwhile, late-stage investments grew 115%, topping $2.1 billion in the quarter under review from $984 million in Q3 2023, driven in part by OYO’s $175 million from a broad range of investors including Patient Capital, J&A Partners, InCred Wealth, among others. Late-stage startups participated in 40 funding rounds in September 2024, an increase of 135% compared to 17 funding rounds in the same period a year earlier.

Fintech remains an investor favorite

The fintech sector continued to receive maximum investor interest, with fintech startups raising $677 million across 45 deals in Q3 2024. September saw several significant funding rounds in the Indian fintech space. For example, SaaS M2P Fintech fintech startup raised $101 million in a Series D financing round from investors such as Helios Investment Partners and Flourish Venture.

Enterprise technology remained the second most funded sector, with startups in the industry raising a total of $549 million across 52 deals in the third quarter. Last month, the enterprise technology sector received a shot in the arm when B2B SaaS startup Whatfix raised $125 million in a Series E funding round with participation from Warburg Pincus and SoftBank.

After reversing the trend in the sector, in September consumer services lost the title of the third most financed sector to the e-commerce sector. E-commerce startups raised funds worth $482 million in 57 transactions during this period. Major financing rounds in the sector, including a $120 million financing round for Purplle and a $107 million round for BlueStone.

Bengaluru retains the top spot

While Bengaluru retained the title of India’s startup hub, Delhi NCR overtook Mumbai to become the second most funded startup hub.

Startups based in India’s Silicon Valley raised $1.1 billion across 81 deals in the third quarter of this year. Bengaluru, Delhi NCR was in second place, with startups based in the national capital region raising $876 million across 59 deals. The country’s financial capital came in third place, with Mumbai-based startups earning $871 million in 47 deals during the period.

Chennai retained its fourth position in the third quarter of this year, with city-based startups securing $189 million in funding across nine deals. For comparison, in the quarter under review, investors placed 8 bets on Hyderabad-based startups worth $50 million.