India’s Retail Startups Get Big Boost from Venture Capitalists in 2024
By Prabhakar Chaturvedi
New Delhi, India, June 30: Venture capitalists are showing great interest in funding retail sector startups in India, driven by the country’s strong consumption patterns. According to data intelligence firm Tracxn, funding in the retail sector increased by 32% to USD 1.63 billion in the first half of 2024, up from USD 1.23 billion in the same period in 2023.
The Indian economy is on track to become the third-largest economy in the world by 2026. Last year, India’s consumption grew faster than that of advanced economies like China, the US, and Germany, as noted in a UBS report. The report also highlighted that India’s household consumption nearly doubled in the past decade to USD 2.1 trillion, with an annual growth rate of 7.2%.
Harmanpreet Singh, Co-founder and Managing Partner of Parth Ventures, commented, “India’s GDP is projected to reach USD 8 trillion by FY32, with consumption expected to remain around 60% of GDP. Thus, Indian consumption is expected to cross USD 4.5 trillion in the same period.” He added that companies like Zomato and Nykaa have shown attractive outcomes in the consumer-tech space, but there have also been failures due to unsustainable unit economics and misallocation of funds.
Singh noted that during 2020-2022, investors favored online and consumer-tech businesses due to the COVID-19-driven surge in digital adoption. However, it became clear that the number of consumers willing to spend significant money online is limited, and many still value the trust and reliability of offline retail.
Shravan Shetty, Managing Director at Primus Partners, said, “The sector’s share has increased as interest in the sector has remained buoyant, while exuberance for other sectors has reduced.” He noted that venture capital is behaving similarly to the markets, with a long-term focus on consumption.
According to the Tracxn report, the first half of 2024 saw 8 funding rounds surpassing USD 100 million, including Flipkart’s USD 350 million Series J round led by Google, Apollo 24|7’s USD 297 million PE round, and Meesho’s USD 275 million Series F round.
Dr. Ashwini Mahajan, who led a delegation of economists that met Finance Minister Nirmala Sitharaman, said, “India, due to its sustained performance on the GDP front, is among the best places to invest.” He highlighted the significant change in spending patterns, with rural spending increasing by 164% and urban spending by 146% since 2011-12.
The Household Consumption Expenditure Survey showed that in 2022-23, rural spending reached Rs 3,773 and urban spending Rs 6,459, reflecting a 164% and 146% increase, respectively, since 2011-12 at current prices.
