Investors foresee higher investment momentum in 2024: Report

In 2024, investors anticipate increased investment momentum compared to the previous year, with a heightened focus expected on deeptech, GenAI, and climate tech sectors, a report by venture debt firm InnoVen Capital said.

This year, 77% of investors anticipate increased funding activity compared to 2023, with 18% expecting similar levels. Only 5% foresee a slowdown, an improvement from last year’s sentiment, where 57% expected a decrease in investment.

“In 2024, we anticipate the early-stage funding environment to improve, with a higher focus on emerging sectors like GenAI, deep-tech, and climate-tech,” said Tarana Lalwani, Partner at InnoVen Capital India.

Last year, early-stage investments recorded the lowest deal volume in four years, yet witnessed increased ticket sizes and valuations, totalling $378 million across 207 deals. B2B businesses, consumer tech, and artificial intelligence (AI) sectors garnered the most interest among investors.

Interestingly, about 86% of investors perceive an excess of dry powder in the market this year.

InnoVen Capital's 'Early-Stage Investment Insights Report 2024' report offers trends on seed and pre-Series A investment activity, with inputs from 22 early-stage institutional investors, including Blume Ventures, Waterbridge Ventures, IndiaQuotient, Kae Capital, Titan Capital, India Angel Network, Inflection Point Ventures, Artha Ventures, Antler, and 100X.VC.

The report highlighted increasing interest in 2024 in emerging sectors, such as deep-tech, AI, and ML, with 73% of investors actively scouting these areas—a significant rise from 20% last year. About 18% of investors are still exploring and learning about emerging sectors and not yet a core area of investment.

While there are positive indicators for 2024, Lalwani noted, “Investors will have a bias for sustainable business models, experienced founding teams, and will do more extensive due diligence.”

According to the report, the main causes of governance issues in recent years include inadequate oversight from investors or the board, an overemphasis on founder friendliness by investors, overlooking red flags, the absence of a strong CFO, and weak management teams.

Started in 2008, InnoVen Capital India provides debt capital to high-growth ventures. It has executed over 400 transactions involving over 200 startups, including 35 unicorns.