Venture capital investors opened up their purses in the July-September quarter, especially to back start-ups looking for growth capital. 

The quarter saw VC investments of 176 deals worth $2.7 billion compared to 164 deals of $1.9 billion in the same quarter last year, per data from private markets research firm Venture Intelligence. From January to September 2024, VCs have invested a total of $8.3 billion compared to $6.6 billion in the same period last year. In the early-stage deals, growth was at 30 per cent YoY but growth-stage and late-stage deals (defined typically as Series C and beyond) grew 106 per cent and 49 per cent, respectively. 

However, compared to the post pandemic liquidity boom, VC firms continue to be selective and pace of evaluating and investing in new deals is still slow. 

Investments in the quarter were driven by funding of e-commerce companies and deployment of money into AI/ML start-ups, which have emerged as the investor favourites in the recent months. The quick commerce boom saw Zepto bag $340 million in funding, unicorns such as PhysicsWallah, Dream11, Oyo and Whatfix raised late-stage capital in this quarter after a prolonged draught. 

Arun Natarajan, founder and MD of Venture Intelligence, said that a bounce back of VCs participation in growth-stage deals (typically Series E and beyond) signals that public market sentiment is trickling down to the private markets. “The US Fed rate cut is also likely to encourage LPs to allocate more to alternative assets,” he added.

Preferred sectors

Sectorally, e-commerce saw a 24 per cent YoY jump in funding at $704 million. Large deals such as the $100 million dollar in banking technology infrastructure firm M2P Fintech pushed up the tally in fintech by 18 per cent YoY. Investments in enterprise software (SaaS) firms slowed, declining by 15 per cent YoY. AI saw an uptick in number of deals but the amount deployed remains relatively lower YoY as majority deals involve early-stage start-ups.

“We expect this upward trend to continue with growing interest from both domestic and international funds despite the global uncertainties,” Anil Joshi, Founder and Managing Partner of VC firm Unicorn India Ventures, and member of the VC Council, IVCA, said. The US Fed rate cut means global investors may start looking at riskier asset classes including those in alternative assets, he added.

Globally, VC funding climbed 5% quarter over quarter in the June quarter reaching $94 billion across 4,500 deals, as per Bain & Company’s recent tracker, marking the second consecutive quarter of growth after a year of decline.

Harsha Mundhada, Principal of VC firm Inflexor Ventures said that the firm has seen increased investment activity in startups focused on GenAI, AI infra and AI agents along with climate and sustainability-focused startups.”The government’s recent decision to abolish the angel tax is also set to boost the early-stage ecosystem going forward,” he adds.

Published on October 14, 2024