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New Unicorns are springing up everywhere across the country as sector ranks second in terms of venture capital funding value in APAC.
After a tough year of raising funds and dwindling businesses, Indian start-ups are back with a bang in 2021 – with the category ranking second in terms of venture capital (VC) funding value among the Asia-Pacific (APAC) countries during January to May this year.
While the first half of 2020 closed at $5.2 billion across 390 deals for Indian start-ups, in H1 2021 (January to June 2021), the total funding raised by Indian start-ups hit a historic peak of $10.8 billion raised over more than 600 funding deals.
The total start-up funding in the first half of 2021 is already 95% of the total funding amount raised in all of 2020. With the entrepreneurial economy gathering traction across India once again, the start-up ecosystem has been able to demonstrate its resilience and leverage the wave of digitization that Covid-19 has resulted in.
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“You have seen incredible resilience. The digitization wave that started last year is continuing. Investors recognize that potential. They know this is a temporary setback. If anything, it is a permanent shift in the right direction for technology-led businesses. We can clearly see investor enthusiasm around that,” Karthik Reddy, co-founder of early-stage investor Blume Ventures, told the Mint.
The funding seen so far is twice the amount seen in H1 2020 and comfortably eclipses the previous historic half-yearly peak of H2 2017, when $7 billion was raised by Indian start-ups.
In terms of the number of deals too, H1 2021 pulled ahead of the historic peak of H1 2016, which had recorded 578 deals.
In Q1 2021, Indian start-ups raised a total of $2.7 billion from 268 funding deals, so a bulk of the amount and deal tally came in the second quarter of 2021 (April-June quarter), amid the second Covid wave in India.
“The second wave of COVID-19 pandemic has hurt the investor sentiments badly and the caution in committing big-ticket investments still prevails. This is also evident from the fact that India did not see the announcement of any billion-dollar deal. Nevertheless, there were some US$100m+ VC deal announcements,” said Aurojyoti Bose, lead analyst at GlobalData.
Some of the notable venture capital funding deals announced during January-May 2021 in India were $502m raised by Mohalla Tech, $500m funding in Zomato Media, $400m raised by Dream11 Fantasy, $400m raised by Dream Sports and $343m funding in Swiggy.
The massive surge – the biggest in nearly five years – in the total funding amount in 2021 is primarily backed by mega deals invested in growth and late-stage start-up funding rounds in sectors such as e-commerce, fintech, enterprise tech, edtech, consumer services and healthtech. A total of 31 mega-rounds have been recorded in 2021 so far, in comparison to 28 in all of 2020.
The emergence of 14 new unicorns in India so far this year is another major indication of the growing investor appetite around these late-stage start-ups, which have raised a majority of the funds in the year, compared to 11 unicorns in all of 2020.
Tiger Global, for instance, has taken a giant leap in terms of its Indian portfolio. The New York-based VC firm has been participating in one unicorn round after another, helping India rapidly rush towards its target of 100 unicorns. Out of the 13 start-ups that have become unicorn this year, Tiger Global has been an investor in eight of them including Infra.Market, Innovaccer, CRED, GupShup, ShareChat, Groww, Chargebee, and Moglix. Overall, it is an investor in almost half of the 56 Indian start-ups that have entered the Indian unicorn club to date.
According to Sumer Juneja, partner and head of India at Softbank Investment Advisors, Indian start-ups will continue to scale rapidly with their tech-first approach that makes them much better placed to win in the post-pandemic marketplace than the traditional industry. “There will be a shift from unorganized to organized but there will also be a material market share gain for digital first companies," he said.