2024 Was Tough for Indian Startups, But 2025 Holds Promise

India has more than 73,000 startups with at least one-woman director that
have been recognised under the Startup India Initiative. India has more than
73,000 startups with at least one-woman director that have been recognized
under the Startup India Initiative creating 45 percent of employment
opportunities. The Indian startup ecosystem experienced a rollercoaster ride in
2024, characterized by a slight yet concerning increase in funding activity and a
shift in investor sentiment. However, there was a silver lining, with several
startups achieving unicorn status.
Despite facing global economic challenges, India's startups showcased
remarkable resilience, adeptly navigating changing market conditions, while
continuing to attract investments.
According to data from Tracxn, Indian startups raised a total of USD 30.4 billion
in funding throughout 2024, a 6.5 percent decline from the USD 32.5 billion
secured in 2023 leading to a contribution of a boost 1.2 percent of GDP.
Despite this dip, the Indian startup ecosystem demonstrated resilience, with
several companies achieving unicorn status this year. Noteworthy entrants to
the unicorn club include Rapido, Ather, Perfios, Porter, and Money View,
highlighting ongoing innovation and investment interest in the sector.
The overall funding trend reflects a cautious-yet-optimistic approach from
investors, as they navigate a more selective funding environment, while still
recognising the potential of high-growth startups in India. A slight shift towards
early-stage investments was evident during the year, with seed and Series A
rounds gaining traction, as investors sought to back innovative ideas with long-
term potential.
Businesses that could demonstrate robust underlying unit economics found
greater favour this year, Dushyant Singh, Managing Partner at Playbook
Partners, noted.
Gig economy, retail, and enterprise applications stood out as top-performing
sectors, according to Traxcn. Quick commerce emerged as a high-growth sector,
with 40 active companies, including unicorns Zepto, Blinkit, and Swiggy
Instamart, and promising newcomers Dunzo, Swish, and Farmako.
In July, the government announced the abolishment of the angel tax on
investments in startups to provide a more conducive environment for growth.
"By eliminating this tax, the government has provided a much-needed boost to
investors and entrepreneurs, enabling greater liquidity and more flexible
funding options for startups. However, fewer funding rounds, high operational
costs, and infrastructure challenges remain ongoing factors that need
attention," said Jeenendra Bhandari, Chairman, JITO Incubation and Innovation
Foundation (JIIF). There was an encouraging rise in women entrepreneurs and
founders from Tier 2 and 3 towns. Ninad Karpe from 100X.VC said the
entrepreneurial culture has transcended its traditional boundaries.
"The entrepreneurial culture has transcended its traditional boundaries,
seeping into colleges, schools, and even Tier 2 and 3 towns. Founders from
these regions are bringing fresh perspectives, solving hyperlocal problems, and
creating opportunities that were previously untapped.
"There's a noticeable rise in women entrepreneurs, signalling a positive shift in
inclusivity and diversity within the startup ecosystem," he said. According to
official data, India has more than 73,000 startups with at least one-woman
director that have been recognised under the Startup India Initiative.
Despite the positive trends, challenges persist.
Global economic uncertainties have a direct impact on investor sentiment and
funding availability.
"While the number of deals has seen a quarterly increase of 10-20 per cent...
deal values have declined significantly. This reflects a cautious investment
climate, with most funding rounds being either follow-ons by existing investors
or bridge rounds aimed at extending the runway rather than driving growth.
The focus has shifted from valuation-driven funding to sustainability and
profitability," FAAD Capital CEO Aditya Arora said.
The growth in venture capital this year was mainly driven by increase in mid
and late-stage investment, leading to some infrastructural developments as
well in certain areas, Singh seconded.
Startups continue to grapple with rising operational costs, which can strain
their financial sustainability. Several Indian startups have gained fame and
achieved unicorn status despite not being profitable.
Many startups still face challenges related to inadequate physical
infrastructure, particularly in Tier 2 and Tier 3 cities. This can hugely affect
logistics, supply chain management, and overall operational efficiency.
Moreover, navigating compliance requirements can be cumbersome for new
businesses, diverting resources away from innovation and growth.
A fitting saying for the current situation of the Indian startup ecosystem could
be: "In the midst of adversity, hope is the seed from which resilience grows."
Despite a rough patch in recent years, the Indian startup landscape has shown
remarkable buoyancy.
The increasing trend of Indians returning from abroad to establish businesses is
also expected to invigorate the ecosystem with global expertise, Bhandari
believes.
Cautious optimism in 2024 is expected to continue into 2025, broader market
recovery may still be two years away, with significant improvements
anticipated by 2026, Arora said.
"In the interim, the ecosystem is expected to witness an increase in SME IPOs,
unlocking real value for investors and startups alike," he said.
The rise of artificial intelligence, machine learning, and blockchain technologies
is expected to attract significant investment. Startups leveraging these
technologies will likely be at the forefront of funding conversations.
Deloitte's Chirag Agrawal said AI is enabling efficient operations and supporting
data-driven decision-making.
AI-focused startups are attracting significant investments, particularly in high-
impact areas such as healthcare, finance, and sustainability, he said.
"For 2025, India's entrepreneurial ecosystem is poised for continued growth,
driven by technological advancements, government reforms, and a favourable
macroeconomic environment.
"Emerging trends include significant investments in Deep Tech, Electric
Vehicles, Clean Tech, Defence Tech, and Space Tech. These sectors are expected
to attract substantial funding, particularly in AI, sustainable technologies, and
space commercialization, positioning India as a global leader in these high-
potential areas," he said.