Rising from Setbacks: India's Tech Startups Eye a Resilient 2024

Despite challenges in 2023, Indian tech startups project optimism for 2024. The report underscores resilience, shifting investor strategies, and a focus on deep tech solutions, signaling a matured industry set for sustainable growth. Read on.

Swati Dayal
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Indian Tech Startups

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After grappling with the worst year in startup funding in the past five years, Indian startup founders are expressing optimism for a significant turnaround in 2024, according to a survey report by tech association NASSCOM in collaboration with management consulting firm Zinnov.


This report sheds light on the expectations of startup founders, highlighting improved funding, increased public listings, and enhanced profitability as key trends for the upcoming year. The report also highlights the conversion rates of the tech startups from one funding round to another and other challenges that persists in the startup landscape.

India's Tech Startup Ecosystem: A Global Contender

The Indian Tech Startup Ecosystem anticipates improved performance in 2024. Despite facing challenges in 2023, the ecosystem retained its position as the third-largest technology startup hub globally.


The report states, “Home to over 31,000 tech startups and 91 unicorns, India’s tech startup ecosystem ranks third globally and has performed considerably well in comparison to that of developed economies like the USA and the UK.”

Conversion Rates and Strengths of Indian Tech Startups

Examining the conversion rates of startup funding, the report highlights a fascinating point: Indian tech startups exhibit only a 20% conversion rate from Seed Funding to Series A funding, the lowest among all ecosystems. However, the conversion rate post Series B Stage is 30%, ranking among the highest globally.


The report says, "As they advance, conversion rates improve. 36 out of 100 Series B Indian tech startups secure Series C funding, ranking second to Israel. Notably, at Series D and beyond, Indian tech startups exhibit the highest conversion, with 48 out of 100 Series C startups reaching Series D and beyond."


The two robust pillars supporting Indian tech startups are the highest number of STEM graduates and the second-highest number of incubators and accelerators.


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Challenges of 2023: A Brief Overview

The report indicates that the preceding year witnessed a considerable downturn in startup funding, with deal volumes plummeting by 48 percent compared to 2022. Despite this challenging environment, the outlook for 2024 appears more promising, signifying a potential recovery for the startup ecosystem.


Founders' Expectations and Cash Flow

The survey reveals that only 46 percent of Indian startup founders anticipate an improvement in the funding environment in 2024. Nevertheless, a silver lining emerges as startup founders are banking on improved cash flow, with 60 percent expecting a surge in revenue during the year. This aligns with a shift in investor priorities, urging startups to prioritize sustainable profitability and expenditure optimization over rapid growth and valuation.

“Over 60% of tech startup founders expect to increase revenues next year. While the global environment is uncertain, 46% of tech startup founders expect a better funding environment in 2024. Late-stage investments may continue to lag. Investments in DeepTech likely to continue with over two-thirds of the startups investing in AI to enhance their product capabilities and internal efficiencies. The jobs environment is likely to improve, but almost 50% of startups will continue taking a cautious approach to hiring,” says the report.


However, tech startup founders expect to continue on the revenue growth path but feel that the funding environment may not be easy, especially for large ticket sizes.

Investor Strategies and Changing Landscape

In 2023, 750 startups secured funding, with 72 percent of these being seed-stage deals. Notably, late-stage funding experienced a significant decline, underscoring a shift in investor strategies towards selective capital allocation favoring profitable ideas rather than high valuation companies.

Debjani Ghosh, President of NASSCOM, remarked, "India’s tech startup ecosystem has truly matured, attracting more than USD 70 billion in cumulative funding between 2019 to 2023."

Deep Tech Solutions: A Bright Spot

A notable trend highlighted in the report is the anticipated growth in startups focused on deep tech solutions. In 2023, 14 percent of total funding received by startups was allocated to deep tech solutions, a trend expected to ascend in 2024. As companies across various sectors increasingly automate operations, niche areas such as SpaceTech and ClimateTech are poised to become more mainstream.

Integration of Emerging Technologies

The report also emphasizes that nearly 70 percent of startups are investing in artificial intelligence to enhance product capabilities and internal efficiencies while reducing operational costs. This underscores a broader industry shift towards leveraging emerging technologies for sustainable business practices.

Challenges and Recommendations for Growth

Despite the positive outlook, the report acknowledges that certain challenges persist. Key sectors for DeepTech investment need identification, along with fostering an integrated approach for innovation, market connections, and support in areas like testing, patent filing, certifications, and training.

Bolstering domestic venture fund flow through innovation-focused programs and adopting a pro-innovation, risk-based approach to AI regulation are recommended to further accelerate the growth of the DeepTech sector.

The Indian startup ecosystem is expected to rebound in 2024, with founders expecting improved funding, increased public listings, and growth in profitability. The focus on deep tech solutions and the integration of emerging technologies signal a maturation of the industry, with strategic shifts towards sustainable business practices and profitability. Despite challenges, proactive measures outlined in the report are anticipated to pave the way for a resilient and thriving startup ecosystem in the coming year.

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