Quick commerce remained a hot sector of investment during Q4 of 2024: KPMG

VC investment was quite muted in India during Q4’24, despite relatively strong market activity. Between Q3’24 and Q4’24, India saw a decline from $3.7 billion to $2.6 billion in VC investment, as per a report by KPMG.

The slowdown in completed deals was likely more of a speed bump than a long term challenge, with some optimism that deals will materialize heading into Q1’25.

Quick commerce remained a hot sector of investment during the quarter.

An encouraging trend in India has been the increasing number of tech startups looking at IPO exit opportunities — either filing their listing paperwork or beginning the process to do so. Over the last eighteen months, there has been growing acceptance of these companies by India’s capital markets, stock exchanges, the retail public, and institutional investors. With more institutional investors subscribing to IPOs and more active trade happening, more startups are seeing IPOs as a real exit option.

Trend to watch out for in Q1’25 - VC market activity is expected to pick up through 2025, with more pre-IPO rounds, more IPOs, and more exits in general.

Commenting on the India trends, Nitish Poddar, Partner and National Leader, Private Equity, KPMG in India said, “When you look at the results year-over-year, 2024 has been a much better year compared to 2023 for VC investment in India — and 2025 could be even better. While Q4’24 saw us hit a bit of a speed bump, we’re still seeing a lot of activity in the VC market here, especially in the area of quick commerce. Over the last year, a few of these companies have held successful IPOs, which is giving VC investors’ confidence to make bolder bets given the expansion of potential exit routes.”

VC investment in Europe surpasses Asia-Pacific in Q4’24

VC investment in Europe rose from a subdued $13.7 billion in Q3’24 to a more moderate $15.6 billion in Q4’24. Deal volume in the region remained very low falling from 2,038 to 1,971 between Q3’24 and Q4’23. The UK saw the largest amount of VC funding in Q4’24--$5.4 billion, followed by France (close to $2 billion) and the Nordics region (($1.6 billion).

VC investment in ASPAC falls to $12.8 billion—low not seen in ten years

VC investment in the Asia-Pacific region dropped to $12.8 billion across 1,977 deals in Q4’24—the lowest across both total investment and deal value that the region has seen in over ten years. Funding in the region dropped nearly across the board, with China seeing a drop from $10.3 billion to $5.8 billion between Q3’24 and Q4’24 and Japan seeing a drop from $2 billion to $1.3 billion. Australia saw a small uptick from $636 million to $716 million during the quarter.

All eyes on IPO market heading into 2025

While there continues to be a fair bit of global geopolitical uncertainty, there is a growing sense of optimism heading into Q1’25, driven by the robustness of AI interest and investment, ongoing cuts to interest rates in several key jurisdictions, and signs of hope that the IPO market will rebound during 2025. AI will likely remain the biggest ticket for VC investors, although defensetech, healthcare and biotech, and cybersecurity will likely also continue to attract attention.

Heading into Q1’25, VC investors and startups will be watching the IPO market, particularly in the US, with keen interest. With macroeconomic conditions improving and some global uncertainties stabilizing, there is growing optimism that the exit environment will improve dramatically in 2025, particularly on the IPO side.

VC investment in AI rises to fever pitch

VC investment in AI rose dramatically in Q4’24, driven by an outsized number of very large deals. US-based AI companies attracted the lion’s share of this investment, including the five largest deals of the quarter. In addition, AI startups also attracted the three largest deals in Europe.