This year, startup trade volume dominated with nearly 396 deals totaling $ 705.86 million, while around 166 Series A investments amounted to around $ 1.67 billion, according to data up ‘to December 20.
However, the bulk of the investment has been directed to pre-IPO funding rounds at companies such as Zomato, Ola, Policybazaar and Paytm, with the top 10 deals totaling up to $ 5.58 billion, according to data from Prequin shared exclusively with ET.
In addition to an increase in the number of deals, Indian startups have also raised larger funding rounds compared to previous years as venture capital funds have stepped up to take bigger bets on high-net-worth companies. growth early on. As a result, companies were able to earn higher valuations, often doubling and tripling their value in successive funding rounds.
“Valuations reflect an investor’s exit expectations. 2021 has proven the full risk cycle for India. Some fabulous exits like Zomato, Nykaa, PolicyBazaar and others have increased exit size expectations, and therefore valuations, ”said Alok Goyal, Founder and Investment Partner at Stellaris Venture Partners, a private equity firm. start-up risk.
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Kunal Bahl, Co-founder and CEO, Snapdeal
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Goyal from the depths, Co-founder and CEO, Zomato
He also cautioned, stressing that “markets are used to overreacting on both sides – in bullish and bearish cycles. We are currently seeing a bullish cycle reaction and (will not be) surprised if there is a bearish overcorrection going forward. ”
Goyal attributed the significantly higher capital flow in high-growth companies to a confluence of factors, including higher global liquidity and the relative attractiveness of start-up investments compared to other asset classes.
“We expect the 2021 recovery to moderate, but secular trends will continue into 2022,” he said.
Funds such as Tiger Global, Falcon Edge, Sequoia Capital, Accel, Blume Ventures were among the most active investors this year. SoftBank, which is known for its bigger bets, has invested more than $ 3 billion, making it the largest injection of Indian startups by the Japanese investment firm into India in a single year.
Unicorn, a nickname for startups valued at $ 1 billion or more, has sprung up by the dozen this year. Almost 40 companies have jumped into the unicorn club, with one week in April, half a dozen startups within four days entering the unicorn club. But it wasn’t just the unicorns, high-growth companies also lifted several rounds this year, indicating aggressive intent to back executives.
Fintech startup Cred, OfBusiness, Groww, Cars24, Licious, Spinny, Infra.Market, Good Glamm Group, and Pristyn Care were among the companies whose valuations have increased significantly over the past year.
“During 2021, we have seen a significant positive change in the quality of the founding teams, the depth of the markets, the economics of the units and the exit opportunities via public markets. As a result, investors at all stages have felt comfortable writing bigger checks and taking more risk, ”said Vaibhav Agrawal, partner at Lightspeed India, who supported the new 2021 unicorns as ShareChat and Apna Co.
The founders of Unicorn are of the opinion that in late stage financing deals there are relatively fewer assets and therefore big name investors are ready to soften the deal. “Founders (need to) dilute less and that money can come in handy on rainy days,” said a prominent unicorn founder who has raised capital three times this year.
Armed with all this capital, startups have been able to rapidly execute their exponential growth strategies through inorganic pathways, both vertically and geographically.
Most investors said that sectors that dominated 2021 like web3 / crypto, SaaS, direct-to-consumer or D2C brands and fintech, business-to-business (B2B), edtech and healthcare will continue to attract. funding next year as well.
“Cycles come and go, but the bottom line here is that Indian entrepreneurs have access to the equity capital needed to move closer to their vision of being market leaders,” said Pranav Pai, co-founder of 3one4 Capital, a start-up venture capital fund with investments in Licious and Koo.
“They are also taking this opportunity to strengthen balance sheets and prepare for the resilience needed to face a correction when it arises,” he added.
Today, most mature startups have dedicated business development teams and exit by sale is now a real option for founders, according to Kashyap Chanchani, Managing Partner, The Rainmaker Group, an investment bank based in Mumbai. “Until two years ago, the majority of mergers and acquisitions would have taken place out of distress and a lack of options,” he said.
The year tech IPOs became a reality
For a while when Indian entrepreneurs talked about an Initial Public Offering (IPO) it wasn’t seen as a real option, but 2021 has changed that. The year marked a monumental shift in the way tech-driven companies are able to tap into public markets and most of them are rewarded by public investors as well.
Smaller startups like gaming company Nazara Technologies went public this year, but it was the Rs 9,000 crore IPO of food delivery company Zomato that really set the stage for at least a half. – dozen of leading startups filing for IPO in India.
The founders told ET that Zomato’s stellar roster this year prompted them to rethink their IPO timelines and consider them a serious option for 2022 and 2023.
Others such as Policybazaar, Nykaa, as well as Paytm have raised nearly $ 2.5 billion from public market investors.
Lightspeed’s Agrawal expects the momentum to spill over into the New Year as well.
“India’s founders are some of the best in the world, and in 2022 we see a great opportunity to ‘build for the world’ in India (by supporting) cross-border commerce, fintech, crypto and new categories of software such as PLG and infrastructure. ” he added.