INDIA Trends and Developments Contributed by: Siddharth Mody, JSA Advocates and Solicitors
rising by 1.2 times to USD1.7 billion. This increase was fuelled by growing customer spending on development and testing tools, as well as the maturation of international go- to-market strategies. Generative AI funding, in particular, grew by 1.5 times, reflecting the global AI boom’s impact on India. • Climate tech, EVs and deep tech – Govern - ment incentives spurred around USD600 mil - lion in funding for EV start-ups in 2024. Cli - mate and clean-energy solutions also gained traction as specialised funds entered the market. Space tech received a major boost from policy reforms permitting higher FDI in satellite and launch ventures, with multiple space-tech start-ups securing funding. • Cooling sectors – Edtech’s decline after the COVID-19 pandemic era has been stark, while healthtech had mixed results. Crypto/ Web3 start-ups struggled under India’s tight stance on cryptocurrencies and heavy trans - action taxes, diverting some entrepreneurs to friendlier jurisdictions. Still, the broader reallo - cation of capital suggests a healthy correction away from overheated pockets. Shifts in Investor Base and Strategy During the liquidity surge of 2021–22, foreign and crossover investors were prolific in India. In 2023–24, some pulled back, particularly from Japan and China, while Middle Eastern sover - eign funds (eg, ADIA, PIF) became more active. Domestic investors, including family offices and the government’s Fund of Funds for Start-ups (FFS), stepped up significantly, creating a more balanced capital mix. In 2025, Indian VC is expected to be less vulnerable to a single source of funding, enhancing ecosystem stability. Investors have also adopted sharper theses and become more hands-on. Rather than spraying capital across numerous sectors, many VC
firms now concentrate on areas where they pos - sess deep expertise. Protective clauses in term sheets, liquidation preferences, anti-dilution and founder lock-ins are common, reflecting a heightened focus on governance. Collabora - tion among VCs increased as well, with more club deals involving multiple investors who pool expertise and share risk. India-centric funds continue raising fresh capi - tal, joined by corporate venture arms from large conglomerates seeking strategic stakes in fin - tech, AI and other promising sectors. There are also first-time foreign entrants who see India as part of “China+1” strategy, diversifying their Asia portfolio. Exits and Liquidity After a near-freeze in 2022, exit activity revived in 2023–24, though it did not match the exu - berance of 2021. India’s IPO window reopened cautiously for venture-backed companies with strong fundamentals. Landmark listings included Swiggy, Ola and FirstCry. These successes indi - cated that the domestic markets could absorb tech IPOs when the financials were robust. M&A and secondary sales, however, played an even bigger role in driving exits. In 2023–24, a substantial share of VC exit value came from secondary transactions, where late-stage funds or sovereign investors bought stakes from early backers without the start-ups going public. Stra - tegic acquisitions by corporate giants, Reliance Industries, the Tata Group and large unicorns, have also consolidated technology and tal - ent under larger platforms. While exit timelines remain protracted compared to earlier hopes, the environment in 2025 is expected to be mark - edly healthier than it was in 2022.
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