Indian Startups Navigate Challenges as Funding Declines

In the final week of April, venture capital (VC) funding in Indian startups witnessed a downturn, reflecting a decline in deal momentum and a growing preference for debt financing. The total VC funding for the week amounted to $192 million across 21 deals, a significant drop from the previous week’s total of $339 million—the highest raised this year.

During this period, debt financing gained traction, accounting for $69 million of the total funding. This trend underscores the challenges startups face in securing equity capital, pushing them towards alternative financing options to sustain their valuations.

The funding environment remains uncertain, influenced by conflicting signals from the US economy, particularly regarding interest rates set by the US Federal Reserve. A potential interest rate cut could boost VC inflows into the Indian startup ecosystem.

Amidst this uncertainty, Indian startups experienced mixed fortunes. While FirstCry withdrew its IPO papers to address regulatory queries, Swiggy, a food tech unicorn, announced plans for a $1.2 billion IPO. Conversely, Koo, a social media platform, grappled with funding challenges, resulting in salary payment delays for its employees.

Despite these challenges, VC firms like Norwest Venture Partners are raising fresh capital, signalling potential funding opportunities for startups soon. Key transactions during this period include NBFC Northern Arc securing $80 million from the International Finance Corporation (IFC) and fashion retailer Lyskraft raising $26 million from various investors.

Additionally, networking tech startup CloudExtel secured Rs 200 crore ($24 million approx) from NIIF Infrastructure Finance Limited and Aditya Birla Finance Limited. EV aggregator LetsTransport raised $22 million from multiple investors, while sustainability startup Accacia secured $6.5 million from Illuminate Financial, AC Ventures, Accel, and B Capital. Agri finance company Samunnati also raised $5 million from Enabling Qapital, highlighting the diverse funding landscape amidst ongoing challenges.