India’s investment climate is improving amid global venture capital slowdown due to geopolitical tensions, KPMG report says

Amid geopolitical tensions and seasonal downturns impacting global venture capital (VC) investment, the Indian VC market remained strong, attracting $3.6 billion. This growth was fueled by several successful fundraising rounds from consumer-focused businesses, according to a report from KPMG.

In contrast, global venture capital investment declined significantly, from a five-quarter high of $95.5 billion in the second quarter of FY24 to $70.1 billion in the third quarter of FY24, the lowest in nearly seven years. fell.

Major funding rounds in India have been predominantly led by business-to-business (B2C) companies, unlike other regions where business-to-business (B2B) companies attract the majority of VC investments. While fintech companies continue to gain significant traction in India, investors have become more cautious in recent quarters, with traditional banks increasingly offering in-house fintech solutions aimed at serving large underbanked and unbanked populations, the report said.

As Nitish Poddar, Partner and National Leader, Private Equity at KPMG in India, noted, the revival in venture capital activities is expected to continue. This trend will continue as investors adapt to a clear path to profitability and strong growth trajectories characterized by high levels of customer engagement, he noted.

Globally, the Americas continued to attract the largest share of VC investment in the third quarter, but total investment in the region fell from $58.6 billion in the second quarter to $41.4 billion in Q324. Meanwhile, financing in Asia decreased from $18.5 billion to $15.6 billion compared to the previous quarter, while Europe saw a decrease from $17.9 billion to $12.5 billion.

Change in investor preferences.

As AI continues to garner significant attention in Q324, with six of the ten largest deals during the quarter, Conor Moore, Global Head of Private Enterprise at KPMG International, has observed a shift in investor preferences. He explained that investments in AI are currently experiencing a downturn, marked by a trend towards smaller deals. “This shift marks a move away from core AI companies specializing in large language models (LLMs) to companies offering highly targeted industry solutions. Defense technology in particular emerged as a key winner this quarter, alongside biotechnology,” he said. .

Exit activity in Asia rose to $18.2 billion from $11.2 billion in the previous quarter. In contrast, outflows in the Americas fell from $25.4 billion to $11.2 billion, while Europe saw a decrease from $16.3 billion to $9.8 billion. The report also noted that global fundraising is lagging behind the pace needed to even reach the $202.8 billion suppressed total in 2023. At the end of Q3 FY24, global fundraising reached $143.1 billion.