The total funding volume has remained stable at $3.9 billion in the first five months (January-May) of 2024. Although the rate of fund raising has remained flat compared to last year, the good thing is that it has not declined like in the last few quarters. Along with this, there has been a significant decline in deal activity, which indicates that deals are being scrutinized.
The number of deals fell 39 per cent to 465 this year compared to 758 deals in the same period last year, according to data from market tracking platform Tracxn.
Anirudh A Damani, Managing Partner, Micro VC Fund – Arth Venture Fund, says, “The current investment landscape is undergoing a strategic shift. Investors are now preferring startups that are able to deliver a return on capital employed (ROCE) that is higher than their expected ROI, thereby creating substantial value for both shareholders and founders.”
Big size deals
Though the market is witnessing fewer deals, the ones that are happening are much bigger. Data from Tracxn indicates that the average deal value so far this year has risen 40 per cent to $10.1 million, from $6.1 million a year ago.
Vikram Chachra, founding partner at 8i Ventures, a fintech-focused VC fund, says, “Investors are getting attracted to startups with large funding. We are seeing a category of startups in our portfolio that have scaled up and are profitable. When they come to raise between $35 million and $50 million (rounds), they get multiple offers.”
Investors say these ‘start-ups’ that have won deals mainly include companies that have demonstrated the ability to scale up operations, achieve profitability and create shareholder value through disciplined and efficient management of capital.
First Published – June 6, 2024 | 10:07 PM IST
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