Investors eye booming startup scene, 2024 presents exceptional growth potential.

Investors are optimistic about the growth of the maturing startup ecosystem in 2024, despite challenges faced in 2023. The number of unicorns dropped from 110 in 2022 to 72 in 2023, and funding decreased to $8 billion. Edtech and health tech segments were particularly affected, with several firms shutting down and valuations plummeting. However, investors believe that startups with sustainable business models and well-capitalized ones will weather the current turmoil. Venture capital firm Lightspeed expects consolidation and valuation correction, but still sees progress in the end. Corporate governance issues also impacted the startup ecosystem, causing concern among investors. The funding decline and governance issues have led to caution among lenders. Unicorns have become more cautious before going for public valuation, and those raising funds are offering flat valuations or promising discounts in the next round of fundraising. The decline in valuations varied across sectors, with health and medtech segments seeing an 8% decline, e-tail and marketplaces experiencing a 9% decline, and fintech seeing a marginal decline of 2% in 2023. However, startups with sustainable business models and those innovating in areas like artificial intelligence, software-as-a-service, deep tech, fintech, electric vehicles, and casual gaming are expected to progress well. SoftBank Group sees maturity in the funding ecosystem and the emergence of global technology companies out of India. Founders’ focus on operating performance leads to robust, sustainable growth with a clear path to cash flow break-even. In 2023, companies like Lenskart, Firstcry, Meesho, and Ola Electric were able to raise capital from external investors due to strong operating performance. While some investors have faced losses, others have had successful IPOs. Investors believe that 2024 will bring more IPOs and expect core themes such as local consumption, fintech, enterprise software-as-a-service, and infrastructure to dominate deal flow. The fintech sector has also seen growth due to the crackdown on Chinese loan apps, creating opportunities for Indian firms. Overall, while there have been challenges in 2023, investors remain hopeful for the growth of the startup ecosystem in 2024.