Number of firms planning to raise funds increases threefold YoY: Report

Bengaluru: The prospect of central banks in North America, Europe and Asia executing interest rate cuts this calendar year has pepped up enterprises seeking to get past the funding winter that kicked in last year. A report by market research firm Acuity Knowledge Partners found that while interest rates and economic conditions will dominate funding decisions from investors this year, there is already a beeline of fundraisers waiting to make the most of it.

Over 66 per cent of firms surveyed for the report said they are planning to raise funds in 2024, up from 22 per cent last year. According to the report, the level of difficulty in funding is likely to move to “moderate” from “moderate to slightly high” in the previous survey, chiefly due to an expected dovish stance from policymakers, even as other challenges like the lack of suitable opportunities and concerns in terms of valuations remain. Most respondents to the survey expect valuations to decline this year, with VC-backed companies impacted the most.

But the mood is definitely a departure from last year’s when funding for technology startups in India alone fell 72 per cent to $7 billion, compared to $25 billion in the year prior, according to private markets data firm Tracxn. However, akin to last year, emerging markets are more optimistic than developed markets about fundraising due to stronger economic activity.

Venture capital is expected to continue flowing into technology-related sectors, heralded by emerging technologies like artificial intelligence and machine learning. However, key focus areas for real assets/infrastructure firms are renewable energy and digital infrastructure, the report said.

As per the report, challenges expected to plague the funding environment include limited exits and investment opportunities, along with high competition and resource-intensive regulatory ecosystems.

“The sector feels that suitable opportunities have declined, and respondents consider this to be a challenge, a very close second to their main concern – economic uncertainty… In addition to deal-related issues, regulations and compliance have become a significant concern for private markets firms, with about one-fifth of the respondents rating them as the biggest pain point,” said Chanakya Dissanayake, managing director and co-head of Global Delivery Operations, Acuity Knowledge Partners.