According to a report released on Tuesday by global consultancy Bain & Company, India's venture capital (VC) ecosystem recovered strongly in 2024, with total funding reaching $13.7 billion, a 43 percent increase from 2023.

A 45% increase in deal volumes was recorded in 1,270 transactions, indicating a surge in deal activity. With 2024 funding in the region predicted to be largely consistent with 2023, this revival solidifies India's standing as the second-largest market for venture capital and growth funding in the Asia-Pacific region, the report states.

Deal volumes rose across all sizes and stages, while the average deal size remained stable. Small and medium-ticket deals (< $50 million), which made up around 95% of the deals, increased by ~1.4x, while $50 million+ deals nearly doubled, returning to pre-pandemic levels as high-quality assets attracted deployments.

Megadeals ($100 million or more) also rebounded, with volumes increasing by 1.6 times, as investors backed high-quality companies that successfully weathered the two-year funding winter, according to the report.

According to the report, policy reforms such as eliminating the angel tax, lowering Long-Term Capital Gains (LTCG) tax rates, abolishing the National Company Law Tribunal (NCLT) process, and simplifying Foreign Venture Capital Investor (FVCI) registrations boosted the Indian start-up ecosystem and funding.

"India's changing investment landscape reflects a strategic shift toward long-term growth that prioritizes profitability, innovation, and regulatory alignment, with policy reforms boosting momentum and funding. Investors are increasingly supporting companies with strong unit economics and resilience in the face of global macroeconomic trends," said Sriwatsan Krishnan, a partner at Bain & Company.

"The top 10 most-funded companies commanded a quarter of total VC inflows - nine of them being consumer-focussed, underscoring the sector's dominance in India's evolving startup landscape," says Krishnan. According to the report, tech-first sectors such as consumer technology, software and SaaS (software as a service), and fintech continued to lead, accounting for more than 60% of total funding.

The rapid growth was fueled by significant investments in B2C, edtech, and quick commerce. Companies like Zepto ($1.4 billion in 2024 funding), Meesho ($275 million), and Lenskart ($200 million) raised substantial sums of money.

The sector's rapid growth reflects a strong investor preference for scalable business models with a proven path to profitability. According to the report, funding for software and SaaS (including generative AI) increased 1.2x to $1.7 billion, driven by customer spending on development and testing tools and maturing international go-to-market strategy playbooks.

Traditional sectors also saw significant growth, with BFSI and consumer/retail investments up 3.5x and 2.2x, respectively. BFSI growth was largely driven by investments in affordable housing finance and green financing initiatives, while consumer and retail drew capital from F&B and fashion.

India's exit landscape also saw an increase in activity, with exit values reaching $6.8 billion by 2024. Public markets played a significant role, accounting for three-quarters of the exit value. Several venture-backed companies successfully listed, leading to a 7x increase in IPOs and strengthening the country's reputation as a mature startup ecosystem, according to the report.

The report concludes that India's venture capital market is entering a period of disciplined growth, with investors prioritizing financial sustainability, operational excellence, and clear exit strategies.