Start-up funding goes down despite recovery signs in 2024

NT Correspondent

Bengaluru: Start-up funding in India faced significant challenges last year due to regulatory uncertainty before the Lok Sabha elections, rising inflation, geopolitical conflicts, and disruptions in supply chains. According to startup funding tracker Tracxn, Karnataka was among the hardest-hit states. Despite these challenges, the Indian start-up ecosystem showed signs of slight recovery, raising $11.6 bn in funding in 2024 a 5.4 per cent increase from $11 bn in 2023. However, Karnataka's start-up funding declined sharply.

The state raised only $3.7 bn in 2024, a 24 per cent drop from $4.9 bn in 2023 and a massive 68 per cent fall from $11.7 bn in 2022, as highlighted in Tracxn’s Karnataka Tech Annual Report 2024. Tracxn attributed this decline to multiple factors, including inflation, geopolitical tensions, disruptions in supply chains, and postelection regulatory uncertainty. Complicated taxation structures also added to the difficulties faced by start-ups. Despite these hurdles, Karnataka remained one of the top states for start-up funding, along with Maharashtra and Haryana. Together, Karnataka and Maharashtra accounted for over 63 per cent of all tech start-up investments in the country. The steady decline in Karnataka's start-up funding since 2022 has raised concerns.

Late-stage funding, which supports startups in expansion or exit stages, saw the biggest drop. In 2024, only $2.3 bn was raised, a 32 per cent decrease from $3.4 bn in 2023 and a steep 73 per cent fall from $8.4 bn in 2022. Seedstage funding, which is crucial for early growth, also fell by 18 per cent, with just $349 million raised compared to $428 million in 2023 and $719 million in 2022.

The only positive trend was in early-stage funding, which saw a 10 per cent rise from $1 bn in 2023 to $1.1 bn in 2024, though this was still 58 per cent lower than the $2.6 bn raised in 2022. Tracxn noted a shift in investor priorities, with a growing focus on start-ups that have strong business fundamentals and clear paths to profitability. Investors are becoming more cautious about high-value investments. The overall funding decline was also evident nationwide.