Funding drought in growth stage is due to lack of investible companies, say top VCs

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The current funding drought in growth stage startups is due to a lack of enough investible companies, top venture capital investors said at the Moneycontrol Startup Conclave on August 9.

"There have not been many $50 million plus investments in tech in the last 15 months. We are looking very hard," said Sumer Juneja, who spearheads SoftBank Vision Fund's bets in India.

"India has been a phenomenal market for us. It is right at the top in terms of exits and returns," he added.

Sanjay Nayar, private equity veteran and founder of Sorin Investments, also dismissed any concerns of a funding winter and said that the real problem is the lack of enough good assets to invest in.

"I think a lack of supply of good assets is the case. Funding winter is a misnomer," he said.

Founded by him, Sorin Investments has recently raised Rs 1,350 crore to invest in early stage startups.

Prashanth Prakash, partner at VC firm Accel, said that there was a large demand for new age companies in the public markets as well.

"There is actually a lack of good assets. There is a fundamental mismatch between assets in the public market and the appetite," he remarked.

However, the so called funding winter seems o be abating according to a recent report by Tracxn.

Seed-stage funding increased to $455 million, up by 6.5% from H2 2023 but down 17.3% from H1 2023. Early-stage startups maintained a steady funding amount of $1.3 billion, consistent with H2 2023 but 28% lower than H1 2023. Late-stage funding rose to $2.4 billion, marking a 3.8% increase from H2 2023, although it saw a slight 1.3% drop compared to H1 2023.

Despite these challenges, the first half of 2024 witnessed 8 funding rounds surpassing $100 million such as Flipkart’s $350 million Series J round led by Google, Apollo 24|7’s $297 million PE round, and Meesho’s $275 million Series F round.

Meanwhile, the Indian startup ecosystem is looking at as many as nine IPOs this year. EV maker Ola Electric, backed by SoftBank, hit its upper circuit on market debut today while closing at Rs 91 apiece.

"We are one of the largest share of Ola Electric. What Bhavin has created is phenomenal. He has delivered on the promise of EV revolution," said Juneja of SoftBank at the conclave.

Watch the full edition of the Moneycontrol Startup Conclave 2024 here