With each passing year — and we have had 10 years of recaps and predictions — the future of technology seems less and less certain. But despite the nature of ever-evolving technology, we try to predict where the Indian tech and startup ecosystem is heading.

And so it is in 2024, after the past year that has had its fair share of challenges, success stories and everything in between. We have, of course, taken a look at how the key sectors will look in the new year in our Indian Tech Outlook 2024 series, but there are still some bigger questions to answer:

• Are startups and IPO-bound companies ready for geopolitical headwinds and setbacks?
• Will policies and laws around emerging technologies hold back innovation or spur it?
• Which sectors will face the biggest test with the rise of emerging technologies and regulations around these new areas?
• How will generative AI change the game in 2024 — not only for startups but also for tech behemoths?
• How will the focus on profitability and sustainable models impact Indian VCs, startups and listed tech cos?
• How will the corporate governance debacles of the past two years impact VCs and founders?

We made 24+ predictions last year, and roughly 50% of them were on the mark, while a fair few were just shy of hitting and might come to happen this year. But this time we have eight major predictions for the Indian tech and startup ecosystem for 2024 — along with nine micro-trends that we foresee.

Consumer Services — Get Ready To Pay More For Streaming, Deliveries, Mobility

Platform fees became a thing in 2023 and they are unlikely to be phased out, especially given the clear revenue spike these fees have given to the likes of Swiggy and Zomato.

While Zomato reported two profitable quarters in FY24, Swiggy is also said to be on track to hit the milestone of profitability sometime in 2024. What’s more — both are now charging restaurants a per-order fee as well. So, in some ways, the food delivery giants are turning into double-sided marketplaces.

Quick Commerce Joins Fee Spree: When it comes to quick commerce, similar fees are being tacked on to every order under various names such as handling charges or packaging charges, so expect big announcements from Zepto, Blinkit and Instamart about unit economics improvements.

Ride-Hailing’s Revenue Thirst: On the mobility side, the drive for revenue has resulted in new models such as Ola Prime Plus or Namma Yatri’s subscription plans for driver-partners.

Essentially, the discounts and rebates that were used to grow the user base have given way to the most active users paying a small fee per transaction, or sometimes even for basic services like no cancellations.

Uber, which is striving to turn profitable in India, is also likely to follow suit with such plans in the next year.

OTT Hikes Looming? These platforms are banking on the fact that the most active users will continue to transact, even if other users might drop off. That’s also the rationale that the likes of Netflix and Amazon Prime are likely to use to hike their prices, to defend against the potential threat from a JioCinema-Disney+ Hotstar merger.

Can ONDC Fix Fee Anxiety? The X-factor is ONDC, which could create a new market for the users who grow weary of platform fees. The open network is already bringing some relief to consumers through its seller apps for food delivery and mobility, as we have written in the past year. Expect more such disruptions in 2024.

VC Ecosystem — Consolidation, New Thesis, Partner Rejigs

Partner exits, new fund managers, new funds and old funds slowing down or exiting India altogether —  as we said in our recap of the year for VCs, it wasn’t an easy year, and 2024 is unlikely to come as a relief.

AI Bets With Eye On Exits: The focus on early-stage investments will continue with AI startups getting a bigger chunk of the seed money, but investors are more likely to back those startups that have products and business models ripe for acquisitions by big tech giants.

Deeptech and AI will become a key thesis focus for VC funds as they look for early-stage bets.

After the low returns on existing capital deployed, VCs will prioritise exits in 2024. The movement towards exits began in 2023 when 56% of the investors surveyed by Inc42 reported exits in their portfolio in the year. But it won’t be easy to find the right early bets in GenAI.

Portfolio Consolidation On The Cards: Given the upheaval at VC firms such as Lightbox and Omidyar Network India, we can expect their portfolio companies to face fundraising challenges in 2024. Consolidation of portfolios between firms is also on the cards given that many key partners are looking at new thesis areas.

One also cannot rule out Sequoia-like restructuring when it was rebranded to Peak XV Partners. Foreign funds are definitely watching the regulatory situation closely to restructure their partnerships.

Dry Powder At The Late Stage: Of course, the elephant in the VC room is the dry powder they are holding, and all indications are that this capital will be deployed in pre-IPO rounds or in late stage companies that are set for IPOs in 2025. Investors and startups are anticipating public listings of tech companies in FY25 from the April-June quarter onwards.

As Inc42’s Indian Startup Investor Ranking & Sentiment Survey, 2023 indicates, 38% of investors active in India failed to deploy even 50% of their allocated budget into startups in FY24. Smaller funds will continue to look for early-stage bets to exhaust this dry powder.

In larger funds, the need to deploy this capital will shift focus to late-stage rounds, unlike the past two years when seed was the preferred stage. There is likely to be more pressure on VCs to deploy capital from funds that are running close to expiry.

Big Tech’s Comeback As Investors? Moving on, our conversations with VCs indicate that fundraising will be a struggle for firms as LPs continue to question the ongoing corporate governance debacles.

As a result, big tech companies are slated to once again return to the investment fold after a quiet few years. This is in line with the focus on generative AI startups and AI models emerging in India, which will become attractive acquisition targets for tech behemoths such as Google, Facebook, OpenAI and others.

Fintech — Super App Platforms Will Face The Jio Financial Services Test

If 2023 was the year of super apps, 2024 will be the year of Jio Financial Services (JFS) as Mukesh Ambani’s grand plans in the BFSI space will be seen taking shape.

Jio Wants It All: Already, there are murmurs of Jio disrupting spaces such as consumer durables, merchant lending, personal loans and more. And with the Jio Payments Bank licence, the company is also in the fray to push its payments business which has been lagging behind the competition for many years.

Of course, the likes of Paytm, PhonePe, CRED, BharatPe, Groww and others are unlikely to watch JFS eating their lunch. Expect several new products from these unicorns and listed giants as they push to improve their revenue mix and capitalise on their user base, particularly the ones that are eyeing IPOs in 2025.

Paytm’s Crunch Year: After going through an up-and-down year, Paytm will likely focus on merchant acquisitions in a bigger way as indicated by CEO Vijay Shekhar Sharma, especially given its new lineup of payments devices. This is the best approach for the company, which had to scale back its consumer lending play in late 2023.

Acquisitions On The Card: Of course, one cannot rule out JFS taking the inorganic route to expansion and growth. Reliance Jio and Reliance Retail have banked on high-profile acquisitions in the past few years and this playbook has worked out well for both giants. The fintech landscape’s diversity offers JFS the chance to become the acquisition king in 2024.

Corporate Governance — Serious Consequences For Founders Caught In Legal Probes

Startup founders are used to being in the headlines but not in the way that we saw in 2023. From Ashneer Grover and Rahul Yadav to GoMechanic’s four cofounders and Byju Raveendran, the cofounder and CEO of India’s highest-valued startup (at least till a while back) — many found themselves caught in legal tangles for various reasons.

Lawman Knocking: Some of these founder-related issues are more serious than others with fraud allegations being investigated by the Economic Offences Wing and the Enforcement Directorate. These investigations and inquiries will run their course in 2024, but corporate governance and fraud issues often go under the radar for months before surfacing.

Will many more unicorns and high-profile founders find themselves caught in the legal net? That’s uncertain, but there is a growing concern that a lot of issues have been swept under the rug, and the rejig at VC firms will likely unearth many more cases where founders are hit by fraud allegations.

Erosion Of Trust: “VCs didn’t realise the amount of risk and liability that they are subject to, because they trusted a lot of founders,” at least one early-stage investor told us earlier this year, adding that as this trust erodes there will be more cracks that appear in the woodwork.

However, despite these measures, the sentiment among founders is that investors are not doing enough to improve their role in corporate governance. As Inc42’s Annual Funding Report, 2023 showed 54% of the surveyed Indian founders rated corporate governance measures by investors as moderately or barely effective.

Fate Of IPOs — Geopolitical Tensions Will Complicate Funds Inflow

Ola Electric, Awfis, Firstcry — and a slew of other startups — are lining up for the public markets in 2024. But these best-laid plans could face a curveball with geopolitical conflicts raging in Europe for the past couple of years, in the Middle East and even closer to home in Asia.

A recent EY report looking ahead to 2024 said, “Current events muddy the geopolitical outlook and raise the risk of more significant conflict escalation in the year ahead. But what is crystal clear is geopolitics has become a multiverse: a complex mix of alliances and rivalries, with overlapping bilateral, regional and other types of institutional groupings.”

War, Everywhere: India and Japan are wary of China’s transgressions, while North Korea is reported to be increasing its war-readiness in light of what it believes are US-led confrontations.

For instance, the domestic markets saw some negative sentiments in early October as the Israel-Palestine conflict escalated.

According to investment advisory CapitalMind, “Geopolitical risks create uncertainty, which weighs on economies and equity markets as investors become more risk-averse. This can lead to lower stock prices, especially in the short term.”

Covid Fears Are Back: To make matters worse, there are fears of another wave of Covid hitting big economies — signs of which are already becoming apparent in India. While optimism is high among IPO-bound companies about 2024, they cannot afford to overlook the macroeconomic impact of these conflicts.

The Influence Of Polls: The fact that both India and the US are set for major elections does not make the situation any easier for companies eyeing public markets. In the Indian context, the General Elections will influence market activity and investor confidence to a great extent.

Lightspeed Venture Partners’ managing director Anuj Bhargava believes that generally investors are more cautious and wait for big political events to take shape. “When you have something this substantial coming up, I think people normally like to wait and see the outcome before they make big decisions and IPOs are normally very big decisions… Investors also wait on the sidelines.”

GenAI Revolution — Global AI Regulations; New Realities For Startups

There’s little doubt that 2023 was the year of GenAI and it has already become a crutch that startups and listed companies are relying on to reduce overheads, human resource dependency and more.

But one aspect of the GenAI revolution will become more prominent in 2024 — the push for global or universal regulations to tackle the rise of inauthentic or AI-generated content, ethical AI, deepfakes and other unsavoury aspects in this context.

New Roles, Bigger Budgets: Startups and enterprises will also have to deal with new realities that emerge with the rise of generative AI. For one, we are likely to see more and more companies appoint Chief AI Officers to tackle organisational readiness for emerging technologies.

At least 84% of Indian chief executive officers (CEOs) are raising new capital or reallocating budgets to invest in generative AI, compared to 70% globally, the EY CEO Outlook Pulse 2023 report said.

India-First Models: Startups in LLM ops, AI training, vertical generative AI and localised LLMs will also become more prominent in the year ahead, with India-specific models coming to the fore.

We saw some signs of this in 2023, with the likes of Sarvam AI bagging large early-stage rounds and startups such as Giga ML while the launch of Bhavish Aggarwal-led Krutrim SI was also widely followed by those in the ecosystem.

Early Bets, But Which Ones? The focus of early-stage accelerators is squarely on AI and deeptech too, and in 2024, we are likely to see generative AI become more horizontal than ever before as adoption grows across sectors — even if some of these will largely be experiments for the most part.

Companies are still figuring out how to leverage AI beyond increasing efficiency and reducing turnaround times for customer support, content creation and user experience features.

Peak XV managing director Rajan Anandan told Inc42 in October that India is witnessing the incredible growth of AI and deeptech innovation, as well as the abundant talent in these sectors. “It seems that more and more companies are AI companies today,” Anandan added about the latest cohort of Peak XV’s Surge accelerator.

That said, many investors also acknowledge that early bets can be hit or miss and there is a risk of spray-and-pray in generative AI investments.

Ecommerce — Amazon-Flipkart Duopoly To See Cracks

For years now, ecommerce in India has been all about Amazon and Flipkart. Snapdeal, Paytm Mall and a host of other marketplaces fizzled out, but the two giants have continued to grow larger.

Meesho’s Time To Shine? Between 2019 and 2021, D2C brands tried to shake off the duo but realised they could not afford to ignore their reach and scale. But in late 2022, Meesho looked to break this duopoly, and in 2023, the company claims to have done just that.

While Meesho’s financials are not yet out, the Bengaluru-based unicorn claims to have crossed INR 5,000 Cr in revenue in FY23 and cut its losses by 50%. Meesho’s focus has been on small sellers and low-ticket-price items, which dot India’s unorganised retail channels.

Digitising this class of merchants has seemingly worked out for Meesho, even though Amazon India and Flipkart still have a significant revenue and logistics advantage. In 2024, Meesho is likely to focus on the latter to unlock more efficiencies.

Everyone Joins The Ecommerce Race: Beyond Meesho, Amazon and Flipkart have to deal with Reliance’s JioMart, TataNeu as well as the rapidly-growing quick commerce platforms which have creeped into the marketplace territory with their dark store models. Blinkit sells books and electronics; Swiggy Mall (formerly Maxx) has Dipak Krishnamani, a former Amazon marketing executive, leading the business.

In other words, the duopoly of Amazon and Flipkart has never looked shakier, and 2024 promises to revive the ecommerce royal rumble again. Walmart-owned Flipkart is readying a war chest of $1 Bn to get set for the battle and also take it through to the public listing, similar to what PhonePe did in 2023.

There was some speculation that Meesho might once again revisit its live commerce and social commerce thesis in the near future, through acquisitions of short video platforms. Social platforms such as Josh, Sharechat, Roposo and others have struggled to maintain the momentum they once saw and could become acquisition targets for Meesho and others

Policy Headwinds — New Challenges For Edtech, Ecommerce, Fintech, Big Tech

Continuing on the ecommerce theme, there is another potential headache for the marketplace giants. The Indian government has already stated that the National Ecommerce Policy is coming in 2024, and besides this, the social security code for gig workers could also see the light of day after years of delay in its implementation since the initial announcement.

Rules Of The Ecommerce Game: The ecommerce policy is widely expected to be in favour of small sellers and could further complicate the holding structures of marketplace giants and the alleged preferential treatment for some large sellers. Besides this, discounting and predatory pricing are two other points where the policy could disrupt the existing incumbents, allowing room for more players to break through.

Will Gig Workers Get Their Due? With issues in gig economy platforms persisting in 2023, the social security code could be a much-needed relief for part-time delivery workers and mobility partners. In particular, startups and platforms would have to allocate a portion of their revenue for gratuity, pension, provident fund contributions and insurance of gig workers.

In this context, the rising reliance on platform fees also makes sense. The logic being that companies would charge consumers to pay for workers. How this impacts the profitability of platforms remains to be determined.

The Question Of Data: Another key piece of the policy puzzle is the Digital Personal Data Protection Act and the much-discussed National AI Policy. The former is expected to give a few headaches to fintech, social media, enterprise tech and services companies, while the AI policy is likely to mandate stricter rules to deal with AI-generated content in media.

We have covered the contours of the DPDP Act, which brings clarity to users on how their data can be used by companies and also informs tech startups on how they must deal with users’ personal data, and consent. But, as we reported, many entities have highlighted that the law falters on aspects like implementation and a few other parameters.

All-Important AI Regulations: There is far less clarity on what a potential AI policy might entail, but if recent statements by the government are any indication, there is some momentum on this front as well. In the inaugural statement at the virtual G20 summit, PM Narendra Modi called for using technologies such as AI in a responsible manner.

Union IT minister Ashwini Vaishnaw is said to have discussed the issue of inauthentic content such as deepfakes with representatives of social media platforms in November. Which direction will India’s AI policy take and how significant will India’s mass of users prove in negotiations for global AI regulations, even as big tech companies such as Google, OpenAI, Facebook and others dominate this space. Expect more clarity on this in 2024.

…And Nine Other Trends (Very Briefly)

1. Casual & Mid-Core Gaming To Change The Game As RMG Fades Into The Background 
2. More Unicorns Eyeing India IPOs Will Look To Reverse Flip 
3. Green Hydrogen, Circular Economy Will Take Climate Tech Beyond EVs
4. Mid-sized IPOs To Be The Theme Of 2024 In The Public Markets
5. Generative AI Will Be The Latest Reset In Edtech After Hybrid Models
6. Kirana Tech Wave Of 2020 Will Die Down, Acquired By Quick Commerce Leaders
7. Geopolitical Tensions Will Clip Global Ambitions Of B2B Players
8. Social Media Platforms Will Bank On GenAI To Fill Creator Gap
9. Generative Coding Will Change Cybersecurity Game — For Attackers And Defenders