Many companies will go public this year despite challenging conditions: InnoVen Capital

Venture debt firm InnoVen Capital sees several high-quality companies going public this year despite challenging macro factors, as funding picks up across stages and sectors.

In its tenth edition of the India Startup Outlook Report, the firm has also underlined higher appreciation for sustainable business models and a laser focus on unit economics and profitability, challenging the notion of startups looking to scale quickly and burning cash.

“2024 reversed the trend of a weak funding environment, with investments increasing to ~$12 billion. We saw numerous tech IPOs, such as Swiggy, Ola Electric, Firstcry, Blackbuck, Awfis, ixigo etc. While the macro is challenging, we expect several high-quality companies to go public in 2025,” said Ashish Sharma, Managing Partner, InnoVen Capital India.

According to the report, out of those startups that attempted to raise funds in 2024, 63% had a favourable experience, compared to 68% in 2023.

For the third consecutive time in nine years, founders had shown a higher bias for profitability compared to growth.

However, the report notes that, as the funding environment recovers, the focus on growth has gained momentum in 2024 compared to 2023.

Additionally, founders continue to believe that domestic initial public offering (IPO) is the likely mode of exit, with 73% of the founders choosing this as the right time to exit.

Preference for mergers and acquisitions as a mode of exit continued a downward trajectory; overseas IPOs are also not being preferred anymore.

Meanwhile, amid discussions around artificial intelligence (AI), 28% of the founders believe that AI will have a significant impact on their business models over the next 2-3 years, primarily in the fintech and software-as-a-service (SaaS) sectors.

The report also observed that AI and quick commerce were overhyped segments in 2024 while health-tech was found to be the most underhyped sector.

As funding picks up in 2025, companies are likely to ramp up hiring, the report said.

Around 83% of the founders are optimistic about raising their next round at a higher valuation this year. This is in line with last year’s sentiment. Expectations of lower valuations have come to 5% this year from 6% last year.

InnoVen Capital has to date completed over 400 transactions with more than 200 startups and its portfolio includes food-tech major Swiggy, second-hand car market place Spinny, and IPO-bound Ather Energy.