Indian startups have raised close to $30 billion in funding in 2021, recording a growth of more than 100% over last year. Firms had collectively garnered about $10.9 billion in investments in 2020, according to data sourced from market research firm Tracxn.
A buoyant funding momentum and a record number of unicorns (over 40) capped the year as investors rushed to back a spate of new-age firms amid rising consumer appetite for tech-led products and services. Digital and app-based services that primarily used to be popular among the Gen-Z and millennials found more takers as the pandemic pushed consumers to move online, widening the market for startups. That startups are seeing broader acceptance is quite understandable: take for instance, instant grocery delivery firm Zepto that already managed to garner $160 million from investors within five months of launch.
Tiger Global Management and Sequoia Capital have made the bulk of the VC (venture capital) investments across Series-C financing rounds and beyond during the year, a factsheet compiled by Tracxn showed. Tiger Global alone infused close to $2.3 billion into local startups in the current year, according to estimates given by market research firm Venture Intelligence.
Titan Capital and Blume Ventures largely supported seed stage and Series-A funding rounds. Among PEs (private equity), Temasek, Lightrock, CDC Group and Dragoneer Investment Group led funding across Series-C rounds and beyond. Apart from VCs and PEs who have been historically helming the investment landscape, the investor ecosystem has now grown to accommodate a good mix of accelerators/incubators and also corporates like Google, Goldman Sachs and Kotak Mahindra Bank. In fact, Google has backed a clutch of Indian startups like Open, Dunzo and VerSe Innovation. The data showed that the number of first-time investors increased to 1,145 in 2021 from about 708 in 2020.
Madhur Singhal, managing partner and CEO, Praxis Global Alliance says that the funding spree is expected to continue well into 2022. While late-stage financing is sure to persist, early stage funding is likely to get a boost as investors are more than willing to bet on newer business models, believes Singhal.
Fintech, healthtech, SaaS segments will continue finding favour with investors; however, the B2B space will emerge as a big theme next year. “The B2C segment has been covered pretty well and investors will now look to balance their portfolios. The B2B sector also gives a better profit profile,” says Singhal. He, however, does not rule out the possibility of liquidity crunch given the indication of tightening interest rates in the US and a choppy stock market at home. “Unless there is a significant liquidity squeeze, I do not see the funding activity fading.”
Startups are allocating big portions of the funds towards hiring skilled talent as the need to build on advanced tech stack and deliver new products is growing amid stiff competition. Established startups like Byju’s and The Good Glamm Group are using the capital to ink M&A deals. Byju’s has spent over $2 billion on acquisitions this year, the biggest one being its acquisition of brick-and-mortar test prep provider Aakash Educational Services in a near $1 billion deal.
With enough availability of capital, brands are also experimenting with new business models. Of late, the quick commerce or delivery of everyday essentials under 30 minutes has gained traction. Grofers, for instance, has rebranded itself as Blinkit to underline its pivot to instant deliveries.
Some of the big funding rounds of the year include Swiggy’s $1.25 billion fund raise led by SoftBank Vision Fund 2 and Prosus. The edTech sector maintained its fund flow led by Byju’s. Byju’s and Unacademy jointly raised over $2 billion in funding. The fintech space too saw a lot of activity with Cred, Slice, BharatPe and Razorpay garnering significant investments. Mohalla Tech, the parent company behind ShareChat and Moj raked in $913 million from investors across three funding rounds in 2021 alone.
“2022 promises to be yet another interesting year for startups from a funding, IPOs, unicorns, and valuations perspective. We believe that there will be a significant amount of capital available for start-ups to accelerate their growth journeys,” said Atit Danak, Principal & Head of CoNXT practice at Zinnov. Danak expects India to have more than 100 unicorns by 2025.