Funding winter for startups likely to thaw this year
MUMBAI : Venture capitalists, who had turned cautious amid last year’s high interest-rate regime and frothy valuations of startups not backed by fundamentals, are likely to return in 2024, betting on early-to growth-stage entities in their pursuit of the next set of winners. The new year will likely see a flurry of investors coming in to back companies, and funding rounds of Series A and beyond are likely to gain traction, industry experts and investors said. “There is adequate capital available, at least for the India opportunity.
Over the next 2-3 years, we’ll see $15 billion of dry powder being invested. I think there has been a nice 20-30-40% correction in valuations, and the deal volumes have not gone down," said Prashanth Prakash, partner at Accel in a recent interview with Mint. Valuations have become reasonable, which will now kickstart the deal cycle again.
“I think there has been a right-sizing of the valuations, having a series A round or a seed or a pre-seed round, be of the right size, and have the right valuations. I do not want to see that change. I think where we need more capital is at the growth stage.
But I think what we should see, and hopefully we’ll see a bit more of, is focused pools of capital come in for early growth and create that entire spectrum, which is very different from the capital that was there because it was there for a different class of companies," Prakash added. Investments by private equity and venture capital funds totalled $27.9 billion last year, a substantial 40% lower than in 2022, data from Venture Intelligence, a private equity-venture capital data provider, shows. This data is updated till 20 December 2023.
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