TLDR:
- Scaled startups from 2020 and 2021 may drive venture capital investment activity in 2024.
- Investors are diversifying into traditional sectors, such as offline retail and BFSI.
According to a report by Bain & Company and IVCA, scaled startups that raised funds in the boom period of 2020 and 2021 are expected to make a comeback in 2024, driving growth in venture capital investment activity. The report also suggests that risk-capital investors looking to broaden their investment base may turn to more traditional businesses this year. In 2023, growth and late-stage startups deferred fundraising, leading to a decline in mega-rounds (> $100 million) from 48 in 2022 to only 15. Additionally, the number of small and medium-sized deals (< $50 million) reduced by about 45% to 852 from 1,501 in 2022. Investments in India in 2023 dropped to $9.6 billion from $25.7 billion in 2022. However, there are signs of improvement, and investment activity is expected to pick up in 2024 over 2023. The report highlights a shift towards traditional sectors such as offline retail and BFSI, indicating a renewed recognition of the potential in these businesses. Tech-focused sectors continue to dominate overall deals, but there is an increasing interest in traditional sectors. For example, tech-first venture capital firms like Accel and Nexus Venture Partners are venturing into the consumer and offline business segments. Emerging sectors like generative AI and electric mobility also saw increased funding in 2023. Generative AI startups attracted $250 million in funding, up from $15 million in 2022. The electric mobility sector received over $600 million in funding, with OEMs and mobility services capturing 70% of the funding. Exit activity also remained robust in 2023, with exits surging by almost 1.7 times to reach $6.6 billion. Crossover funds led the exits, comprising close to 65% of the total exit value. Non-IPO public market sales were the most used exit route, with secondary and strategic sales also increasing in value due to mega-exits in consumer tech firms. Overall, the report indicates positive growth in investment activity in 2024, with a shift towards traditional sectors and increased interest in emerging sectors like generative AI and electric mobility.
