Overview

The startup ecosystem in India continues to evolve dynamically, with significant fluctuations in funding patterns across various city tiers.

In August 2024, the landscape showcased a blend of traditional powerhouses and emerging hubs, with notable shifts in investor activity and deal sizes.

This blog inquires into the city-wise startup funding recap for August 2024, highlighting key trends, economic impacts, and future projections.

Key Highlights:

Delhi NCR Leads: Delhi NCR secured the top spot with ₹1,944 crore in funding, maintaining its status as a premier startup hub.
Emerging Cities Shine: Tier 2 & 3 cities like Coimbatore and Dadri saw substantial increases in funding, signalling a growing trend toward decentralisation.
Tier 1 Dominance: While Tier 1 cities continue to lead, raising ₹6,662 crore, the momentum in smaller cities is noteworthy.
Investor Types: Venture Capital and Private Equity firms were predominantly active in Tier 1 cities, with 48 deals compared to just 5 in Tier 2 & 3 cities.

Deal Numbers & Size

Title - August 2024: City-Wise Deal Size (₹ Cr)

Description - In August 2024, Delhi NCR led with ₹5,488 crore across 24 deals, followed by Bangalore with ₹2,881 crore from 30 deals, and Hyderabad with ₹2,318 crore from just 3 deals. While Tier 1 cities dominated, smaller cities like Mangalore (₹210 crore) and Hisar (₹145 crore) also secured notable single-deal funding, highlighting growing activity beyond major metros.

Note: This does not include secondary and debt deals of unlisted Indian companies. Please note that 114 of our tracked deals were sourced from press reports as the corresponding MCA filings have not been made yet.

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Funding Across Tier 1, 2 & 3 Cities (₹ Cr)

Tier 1 cities saw a significant surge, raising ₹14,029 cr, more than double the ₹6,662 cr raised in July.

In contrast, Tier 2 & 3 cities raised only ₹630 cr compared to ₹2,202 cr in July (led by the massive ₹1,671.20 cr funding round of Coimbatore-based Leap Green Energy).

Average Deal Size for Tier 1-3 City Startups (₹ Cr)

The average deal size in Tier 1 cities soared to ₹140 cr, nearly doubling from ₹77 crore in July.

Title - August 2024: Avg. Deal Size for Tier 1-3 City Startups (₹ Cr)
Description - The average deal size in Tier 1 cities soared to ₹140 cr, nearly doubling from ₹77 crore in July. On the other hand, Tier 2 & 3 cities recorded an average deal size of ₹30 cr, down from ₹169 cr in July and more than double of June average.

Note: This does not include secondary and debt deals of unlisted Indian companies. Please note that 114 of our tracked deals were sourced from press reports as the corresponding MCA filings have not been made yet.

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On the other hand, Tier 2 & 3 cities recorded an average deal size of ₹30 cr, down from ₹169 cr in July and more than double of June average.

Investor Type by City Tier

Tier 1 cities dominated VC/PE activity with 54 deals, compared to 10 in Tier 2 & 3.

Angel investors and family offices were also more active in Tier 1, with 18 and 20 deals, versus just 6 and 1 deals in smaller cities, highlighting the concentration of investment in major hubs.

Job Creation and Economic Impact

The infusion of capital into Tier 2 & 3 cities is not just a statistical shift but a significant driver of economic growth and job creation.

The substantial funding increases in these cities indicate a burgeoning startup culture that could lead to diversified job opportunities and economic upliftment in regions beyond the traditional metropolitan areas.

Comparative Analysis

The month of August saw Tier 1 cities raising slightly less than in June, with a drop from ₹6,880 crore to ₹6,662 crore. In contrast, Tier 2 & 3 cities witnessed a remarkable surge, raising ₹2,202 crore compared to just ₹175 crore in June.

This dramatic increase highlights a potential shift in investor focus, as smaller cities become increasingly attractive due to lower operational costs and untapped market potential.

Monthly Performance

The average deal size in Tier 1 cities decreased from ₹99 crore in June to ₹77 crore in August. However, Tier 2 & 3 cities saw their average deal size skyrocket from ₹11 crore to ₹169 crore.

This suggests that while Tier 1 cities still dominate in terms of overall volume, the quality and scale of deals in smaller cities are catching up.

Investor Activity

The data indicates a clear preference for Tier 1 cities among Venture Capital and Private Equity firms, with a majority of the deals concentrated in these regions.

However, the increasing activity in Tier 2 & 3 cities cannot be ignored, as these areas start to attract more diverse types of investors, including family offices and angel investors, seeking high-growth opportunities in less saturated markets.

In-Depth Insights

Delhi NCR’s dominance can be attributed to its well-established infrastructure, access to talent, and proximity to key government bodies, which facilitate easier regulatory approvals and market access.

On the other hand, cities like Coimbatore and Dadri are emerging as alternative hubs due to lower operational costs and growing local talent pools, supported by government initiatives aimed at fostering regional innovation.

Funding Dynamics

August’s funding dynamics suggest a maturing ecosystem where smaller cities are no longer just peripheral players but are increasingly integral to the broader startup landscape.

The rise in deal sizes and funding volumes in these cities could lead to a more balanced and resilient national economy, less reliant on a few urban centers.

Strategic Investments

Investors are increasingly looking at strategic investments in sectors like agritech, edtech, and healthcare in Tier 2 & 3 cities, driven by the unique challenges and opportunities these regions present.

The higher returns on investment, coupled with government incentives, are making these cities attractive destinations for forward-thinking investors.

Future Outlook

The trend of decentralisation in startup funding is likely to continue, with Tier 2 & 3 cities playing an increasingly important role in India’s entrepreneurial ecosystem.

As these cities grow, they will likely see improvements in infrastructure, talent acquisition, and investment inflows, further solidifying their place on the startup map.

Conclusion

August 2024 marked a significant month in the Indian startup ecosystem, with clear indicators of a shift towards more inclusive growth across city tiers.

While Tier 1 cities remain at the forefront, the rise of Tier 2 & 3 cities signals a new era of decentralised innovation, promising a more diverse and resilient startup landscape in the years to come.

As investors and entrepreneurs alike begin to recognise the potential in these emerging hubs, the future of Indian startups looks more balanced and promising than ever.

Stay tuned for more in-depth analysis and insights on the latest trends in the startup world.