Startup Outlook Report 2024

9th Edition

January 2024
CONTENTS
• Survey Highlights

• Fundraising

• Growth vs. Profitability

• Building Sustainable Business Models

• Business Priorities & Challenges

• Impact of AI

• Global Expansion Plans

• Exit Expectations

• Impact of Funding Slowdown

• Workplace

• Positive Investor Sentiment

• Government Policy

• Overhyped & Underhyped Sectors

• Favourite Startup & Founder

• Respondent Demographics
 FOREWORD
9th edition of InnoVen Start-up outlook report, a view from founders

2023 was yet another challenging year for the start-up eco-system, with a weak funding environment and
a tough global macro. The headlines were less about new unicorns or mega funding rounds but on
layoffs and valuation corrections. While public markets (particularly Tech) has seen a strong momentum
(NASDAQ up 40+%), there will be downward pressure on late-stage private valuations.

On the positive side, we are now seeing a higher appreciation for sustainable business models, a laser
Ashish Sharma
InnoVen Capital focus on unit economics/profitability and more realistic valuation expectations.

We are pleased to release the 9th annual Start-up Outlook report, which will provide some useful insights
to all stakeholders that have a keen interest in the venture eco-system. This report is part of our
continued effort to gauge the current mood & sentiment, as seen through the eyes of entrepreneurs.

InnoVen Capital India: Startup Outlook Report 2024

 SURVEY HIGHLIGHTS

• 68% of those who attempted to raise had a favorable fundraising experience in 2023, down from 71% in 2022

• 78% are optimistic about the fundraising environment in 2024 … SaaS, Deep tech founders most bullish

• 62% founders have a higher bias on profitability v/s growth (highest ever) … up from 55% (2022), 17% (2021)

• 64% believe that a domestic IPO is the most likely mode of exit …up from 63% (2022) and 58% (2021)

• 61% founders expect pace of hiring to stay at same levels or go down compared to last year

• 75% of startups have less than 20% women in leadership ... 45% with less than 10% women in leadership

• 23% believe that artificial intelligence will have a significant impact on their business model over the next 2-3 years

• 24% founders open to professional CEO in next 2-3 years (up from 20% in 2022)

• AI chosen as the most overhyped sector, while B2B & Manufacturing, the most underhyped sector

• Zerodha was the most admired start-up, and Kamath brothers the most admired founders (fourth year in a row)

InnoVen Capital India: Startup Outlook Report 2023

 FUNDRAISING
Funding slowdown continued in 2023, however most founders are optimistic about 2024

How was your funding experience in 2023? Will funding environment be more favorable in 2024?

24% 25%
Favorable Yes 78%

Unfavorable

Did not attempt to raise

No 22%
51%

Trend over time (% favorable) fund-raising experience • Of those who attempted to raise, 68% had a favourable
experience (71% in 2022)
74% 75% 84%
63% 53%
54% 54% • Enterprise/SaaS, DeepTech and Ecommerce founders had the
51% most favorable funding experience

• SaaS & Fintech founders most optimistic, while EdTech &

2016 2017 2018 2019 2020 2021 2022 2023 Consumer/D2C most pessimistic on 2024 funding environment

InnoVen Capital India: Startup Outlook Report 2024

 FUNDRAISING
Ability to do a follow-on round becoming more important in a tough funding environment

Most important factor in choosing a lead investor In addition to India based VC’s, choose one other type
of investor you are targeting for your next round?

Ability to do follow-on funding 32%

37%

Strength of institution brand 22%

Strategic fit 16% 21%

17%
13%
Commercial terms of the deal 13% 9%
3%
Value add / support 11%

Private Corporates / Family Venture Others Hedge

Individual partner sector expertise 6% Equity Strategic Offices Debt Funds

• Importance of commercial terms at 13% (8% in 2022), driven by • ~60% of founders targeting PE, Strategic investors for their next
more “investor friendly” v/s “”founder friendly” terms round … Family offices & venture debt also on their radar

• Strength of the Investor’s institutional brand/reputation • Preference for hedge funds continues to decline … 3% now vs.
continues to be #2 factor (consistent with 2022 survey) 8% (2022) and 15% (2021)

InnoVen Capital India: Startup Outlook Report 2024

 GROWTH VS PROFITABILITY
Bias for Profitability higher than Growth … trend that started in 2022

Between growth & profitability, what is the bigger focus currently? Growth v/s Profitability Bias (By Stage of Company)

Trend over last 8 years

85% Growth & Late Stage 34% 66%

83%
79% 77%

62%
53% 56% 55%
Growth Profitability
38%
47% Early Stage 47% 53%
44% 45%

21% 23%
15% 17%
Growth Profitability
2017 2018 2019 2020 2021 2022 2023 2024

• As the funding environment slowed down over last 2 years, • Growth/Late-stage: Almost two thirds of founders have
there has been a significant shift in Profitability over Growth higher focus on profitability over Growth

• SaaS & Fintech founders have the highest focus on profitability • Early Stage: Profitability ranks higher than growth for first
time in 9 years (53% vs. 33% in 2022)

InnoVen Capital India: Startup Outlook Report 2024

 BUILDING SUSTAINABLE BUSINESS MODEL
Estimated timeline to profitability
When do you expect to turn profitable?

1-2 years 2-4 years Already profitable

59%
13%

19% 39%

30% 7%

69%
11% 54%

1-2 years Already profitable 2-4 years Early Stage Growth & Late Stage

• 30% of respondents claimed they are already EBITDA • Even early-stage respondents are targeting to be EBITDA profitable
profitable, up from 19% in 2022…SaaS leads the pack over the next 1-2 years, while 13% claim to have reached profitability

• Majority of respondents expect to turn profitable within 2 years • 39% of growth / late-stage companies claim to be EBITDA profitable

InnoVen Capital India: Startup Outlook Report 2024

 BUSINESS PRIORITIES & CHALLENGES
Fundraising emerges as both a key priority and a challenge for founders

What are your top 2 priorities in the next 12 months? What are your start-up's top 2 biggest challenges?
(Will not add to 100% as respondents picked up to 2 choices) (Will not add to 100% as respondents chose top 2)

66%
Hiring Good Talent 54%

Fundraising 42%

37% Profitability 34%

31%
27%
Demand Generation 30%

14%
12% Regulatory Environment 22%

Customer Retention 18%

Improve Fund Raising Better Product Enhance Improve Tech Extending
Profitability Market Fit Talent Runway

• While profitability continues to be a top priority, fund-raising • Hiring good talent continues to be the #1 challenge, despite the
moves up to #2 vs. #4 priority in 2022 job market being more “company” friendly

• Achieving PMF (31%) down to #3 priority v/s #2 in 2022 • Fundraising emerges as #2 challenge (up 42% vs. 28% in 2022)

InnoVen Capital India: Startup Outlook Report 2024

 IMPACT OF ARTIFICIAL INTELLIGENCE (AI)
23% believe that AI will have a significant impact on their business model in the near/mid term

48%

• 48% of respondents anticipate some level of disruption to their

business, due to rapid developments/use cases in AI capabilities

• Fintech and Enterprise/SaaS founders identified highest impact of Ai

24% on their business models.
23%

• Most consumer/D2C founders believe that AI will not impact their

business (45%) or the disruption will be insignificant (36%)

5%
• A higher proportion of growth stage founders (49%) believe that AI
will have an impact, compared to early-stage founders (35%)
Minor disruption No impact Significant Can't say
disruption

10

InnoVen Capital India: Startup Outlook Report 2024

 GLOBAL EXPANSION PLANS
62% of founders aspire to enter global markets, primarily the Middle East and USA

• Significant jump in global aspirations (62%) vs. 2022 (49%)

Yes, Southeast Asia 7%

• Middle East moves to #1 spot, ahead of the US, driven by

government initiatives, subsidies, ease of doing business
Yes, Others 9%

• E-commerce, Healthtech, and Edtech companies predominantly

focused on the domestic market
Yes, USA 18%

• Preference for global expansion highest in Enterprise/SaaS, with

US being the #1 focus market
Yes, Middle East 28%

• Consumer/D2C founders primarily focused on domestic markets,

but 36% are open to expanding to the Middle East
No 38%

11

InnoVen Capital India: Startup Outlook Report 2024

 EXIT EXPECTATIONS
Domestic IPOs the most preferred mode of exit, and preference increasing over time

What is the most likely mode of exit for your company ? Trend over time

M&A IPO (India + Offshore)

5% 9%
71% 69% 69%

22%
46% 47%
Secondary Sale
43%
30% 38%
IPO (India)
M&A 40% 39%
39%
IPO (Offshore) 30% 28% 28%
25%
22%
64%

2017 2018 2019 2020 2021 2022 2023 2024

• Focus on domestic IPOs continues to rise - 64% (2023) v/s 30% • An exit through an IPO continues to be the preferred mode,
(2020), driven by successful Tech IPOs over the last 2-3 years followed by an M&A/Strategic exit

• Interest in overseas IPOs falls to 5% (2023) v/s 13% (2022). • Enterprise/SaaS and Agritech founders most bullish on an IPO
Secondary sale as an exit option up to 9% from 3% in 2022 exit, followed by Fintech

12

InnoVen Capital India: Startup Outlook Report 2024

 EXIT EXPECTATIONS
Expected exit timeline for most founders is 3 to 5 years

3-5 years Cant Say Next 2 years

Early-stage
3%
• 53% expect an exit event in next 3-5 years, up from 43% (2022)
21%

44%
• 44% are uncertain on their exit timelines vs. 50% (2022)
16%

Growth / Late-stage
63% • 21% of founders expect an exit within the next two years
53%

• Majority founders anticipate an exit over a horizon of 3-5 years

Early Stage Growth & Late Stage

13

InnoVen Capital India: Startup Outlook Report 2024

 IMPACT OF FUNDING SLOWDOWN
Most founders are optimistic about a higher valuation in the next round

What do you believe has been the impact of the What is your realistic valuation expectation for your
funding slowdown? next round of funding relative to the last round?
(Will not add to 100% as respondents picked up to 2 choices)

Focus on sustainable business models 82%

44%
41%
Corrections in valuations 51%

Disciplined investing 32%

Improving governance 19%

9%
Rationalizing compensations 8% 4% 2%

Difficult to attract talent 1% Significantly Slightly higher Similar to the Slightly lower Significantly
higher previous round lower

• Slowdown driving sustainable business models & lower valuations • Most early-stage founders expecting higher valuations

• Slowdown has also led to more disciplined investing (32%) and • However, 20% of growth/late-stage founders expect a flat to
higher focus on governance (19%) a down round

14

InnoVen Capital India: Startup Outlook Report 2024

 WORKPLACE
Hiring to remain sluggish. Diversity in leadership roles remains a challenge

Expected pace of hiring in 2024 compared to 2023 What % of your top leadership team are women?
Hiring
Significantly Freeze
Higher 45%
2% Significantly
16% 16% Lower

30%
Slightly
Higher 22%
14%
23%
Slightly Lower

3%
29%

Less than 10% 10-20% 20-50% More than 50%

Same Level

• Only 39% expect an increased pace of hiring in 2024 • 75% of cos. have < 20% women in leadership v/s 67% (2022)

• Expectations of a hiring freeze down to 2% vs. 6% last year • 45% of cos. have <10% women in leadership vs 38% (2022)

15

InnoVen Capital India: Startup Outlook Report 2024

 WORKPLACE
76% of founders are open to a professional CEO running their business in the future

Can you see a professional CEO running your company?

• 76% of founders see a professional CEO running their

24%
company, up from 70% in last year’s survey

• 24% respondents open to professional CEO in next 2-3 years

52%
• 52% of founders are open to a professional CEO, however,
only at right stage of business
24%
• 24% respondents feel that founders should always remain in
charge, down from 30% last year

No, founders should remain in charge Yes, possible in next 2-3 years

Yes, but only at the right state of business

16

InnoVen Capital India: Startup Outlook Report 2024

 DRIVING POSITIVE INVESTOR SENTIMENT
More exits and resilient business models will drive a positive investor sentiment

What will drive a more positive investor sentiment ?

46% 46%

• Increase in exits emerges as a key driver for improving investor

sentiment, 46% (2023) vs. 27% (2022)

• More robust business models in the eco-system also highlighted

as a catalyst for improving investor sentiment

2% 3% 3%

More companies More exits More friendly More innovation More unicorns
with robust regulations
business models

17

InnoVen Capital India: Startup Outlook Report 2024

 GOVERNMENT POLICY
52% respondents rate government efforts as positive

Rate government’s efforts to improve the start-up ecosystem What can government do to make it more appealing for start-ups?
(Will not add to 100% as respondents picked up to 2 choices)
74%

8% 60%

15% 33%
Average, needs to do more
Good effort, but can do more 31%
Poor, not helpful 22%
Excellent

44%
Stable regulatory Better incentives Invest in digital Stronger IP
environment to domestic infrastructure protection laws
players

• 52% founders rating government efforts as good or excellent, • A stable regulatory environment and better incentives for
up from 34% last year domestic players chosen as the top 2 areas of improvement

• 33% respondents feel that the government can still do more • Respondents also chose stronger IP protection laws as an area
for the ecosystem of improvement …up 22% vs. 19% (2022)

18

InnoVen Capital India: Startup Outlook Report 2024

 OVERHYPED & UNDERHYPED SECTORS
Founders chose AI as the most overhyped sector and B2B as the most underhyped sector

Overhyped Sectors Underhyped Sectors

AI 37% B2B 12%

Fintech 20% Manufacturing 11%
Edtech 18% Agritech 9%

• AI seen as the most overhyped sector vs. Edtech in 2022 • B2B and Manufacturing emerge as the most underhyped
and Quick commerce in 2021 sectors, vs. Agritech & HealthTech in 2022

• Fintech moves up to #2 overhyped sector vs. #3 in 2022 • Agritech been in the underhyped list for last several years

19

InnoVen Capital India: Startup Outlook Report 2024

 FAVOURITE STARTUP AND FOUNDER
Zerodha chosen as most admired India start-up for the fourth consecutive year

Indian Startup India Founder Global Founder

Admired Most Admired Most Admired Most

Zerodha Kamath Brothers Elon Musk

Zomato Vijay Shekhar Sharma Brian Chesky
OfBusiness Asish Mohapatra Sam Altman

Lenskart Sachin Bansal Jeff Bezos

Zoho Bhavish Aggarwal Steve Jobs

20

InnoVen Capital India: Startup Outlook Report 2024

 RESPONDENT DEMOGRAPHICS
100 founders surveyed across sectors and stages (only VC/PE backed companies)

Top 5 sectors By Stage

68%
Enterprise SaaS/ B2B 22%

32%
Consumer/D2C 22%

Growth and Late Early

FinTech 16%

By City
DeepTech 7% Bangalore 45%

NCR 23%
E-Commerce 6%
Mumbai/Pune 24%

Others 8%

Note: Other sectors includes Edtech, Logistics, AgriTech, HealthTech, etc. 21

InnoVen Capital India: Startup Outlook Report 2024

 About InnoVen Capital
InnoVen Capital is Asia's leading debt firm with offices in India, China and Singapore. It provides debt capital to high growth
ventures. Started in 2008 as the first dedicated venture debt provider in India, the platform offers multiple debt capital solutions,
including venture debt, acquisition finance, growth loans, working capital etc. To date, InnoVen Capital India has executed over
400 transactions, with more than 200 start-ups, including 35 unicorns. Portfolio companies include Swiggy, boAt, OfBusiness,
CureFit, Dailyhunt, Oyo, Licious, Byjus, Eruditus, Cure.fit, Infra.Market, XpressBees, Blinkit, Shiprocket, Elasticrun, Udaan,
Zetwerk, Moglix, Firstcry, Mensa Brands, Blackbuck, Pharmeasy, Rebel Foods, BharatPe, Cars24, Spinny, Slice, Vedantu,
Upstox, Ather, Porter, Chaayos and many more. For more information, please visit www.innovencapital.com

About the report

The Start-up Outlook report is an annual report published by InnoVen Capital & provides an outlook on the sentiment prevailing in
the start-up eco-system through the eyes of founders. The survey is administered to founders & senior leaders and covers a
broad cross-section of companies from early-stage, growth stage and late stage. It covers wide ranging topics around funding
environment, exits, focus areas, challenges and other aspects that are on the mind of founders. The 9th Start-up outlook report
was based on a survey conducted with 100 VC/PE backed start-up leaders.

Data and figures herein may represent the whole or part of a set of responses to a given question to account for data completion
matters.

For more information on the report, please contact:

Arushi@innovencapital.com or Ishaan@innovencapital.com

This presentation material is the property of InnoVen Capital. The material herein is provided for informational purposes only. The information should not be viewed as investment,
legal or other advice nor is it to be relied on in making an investment or other decision.

InnoVen Capital India: Startup Outlook Report 2024