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Anticipating a Surge: Will Startup M&As Pick Pace in 2024?

Investing in startups is akin to embarking on a thrilling journey. With India’s startup ecosystem bustling with over 68,000 tech startups and supported by over 9,700 investors, the potential for investment and substantial returns is immense.

Survey Insights: Momentum from 2023

Inc42’s survey of over 75 Indian investors revealed promising trends. In 2023, 56% of investors marked exits from their startup portfolios, with 36% recording impressive returns ranging from 2X to 5X.

Despite a dip in M&A activity in 2023 compared to previous years, with 123 deals recorded, a significant 55% of surveyed investors anticipate an upswing in exits in 2024. Notably, a staggering 95% of respondents believe that Initial Public Offerings (IPOs) will emerge as the preferred exit route for startups this year.

Shifting Dynamics: IPOs Taking Center Stage

SoftBank’s complete exit from PB Fintech, parent company of PolicyBazaar, for approximately $650 million marked a significant milestone at the beginning of 2024. The impending IPO of Swiggy in mid-2024 has investors eyeing substantial returns.

With benchmark indices like Sensex and Nifty50 soaring, 2024 is poised to witness a surge in IPOs, including those from Navi Technologies, GoDigit, PayMate, and Ola Electric, among others.

M&A Resurgence on the Horizon

While M&A activity slowed in 2023, experts anticipate a resurgence in 2024. Factors such as potential interest rate cuts by major central banks could fuel M&A activity towards the year-end and into 2025.

Bhaskar Majumdar, managing partner at Unicorn India Ventures, foresees significant consolidation in the fintech sector. He predicts Reliance Group’s push for digital expansion through strategic acquisitions.

Diverse Landscape: D2C Brands and AI Startups

Expectations are high for increased M&A activity among Direct-to-Consumer (D2C) brands seeking to overcome growth constraints. Additionally, AI and generative AI startups addressing niche challenges are ripe for acquisition as larger firms embrace the AI revolution.

While some sectors like edtech may experience a slowdown in M&A, others, such as retail tech, are poised for strategic acquisitions as agile companies seek to expand their reach.

Conclusion: Navigating Opportunities Ahead

As India’s startup ecosystem evolves, stakeholders anticipate a dynamic landscape in 2024. With IPOs and M&A activities set to gain momentum, investors and founders alike are primed to navigate opportunities and capitalize on emerging trends.