Indian startups raise $12 billion till June

Mumbai: Indian startups raised $12.1 billion from venture capitalists and private equity firms in the first six months this year, beating the last calendar year’s overall funding by $1 billion, data compiled by Venture Intelligence shared with ET showed.
The continued flow of funds at steep valuations helped catapult a record number of startups into the unicorn club—privately held companies with a valuation of $1 billion or more.


Fuelled by the increased adoption of digital technology across businesses following the Covid-19 pandemic, more funds have lined up to back young and evolved startups, said venture capitalists, entrepreneurs and industry insiders.

The data showed that in the last six months there were more $100 million-plus funding rounds, where late-stage startups raised bigger rounds at headline-grabbing valuations.

Some of the marquee fundraising deals in the January-June period included those by edtech leader Byju’s ($1 billion), food delivery platforms Swiggy ($800 million) and Zomato ($576 million), regional language social media app ShareChat ($502 million) and fantasy gaming startup Dream11 ($400 million).

There were 31 such deals in the first half of this year, compared to 19 in the second half of 2020. In the first half of 2020, there were nine $100 million-plus deals.

“While global investor interest in leaders in the Indian consumer tech landscape has consistently been strong, we are now seeing multiple software businesses coming out of India…raise $100 million-plus growth rounds,” said Shweta Bhatia, partner and head of technology investments for India at Eight Roads Ventures.

There were in total 382 VC deals amounting to $12.1 billion in the six months ended June 30.

In comparison, 764 deals amounting to $11.1 billion were closed for the full year ended Dec. 31, 2020. In 2019, there were 873 deals amounting to $13 billion, while 747 deals totalling $10.8 billion took place in 2018, the data showed.


Listing Plans

Quite a few tech startups are eyeing a public market listing this year.

Restaurant discovery and food-delivery app Zomato will lead the way later this month with an initial public offering (IPO), followed by Paytm, Nykaa and PolicyBazaar later this year.

“The nature of digital adoption has crunched what would have taken place in 4-5 years into 1-2 years due to the pandemic,” said Anup Jain, managing partner, Orios Venture Partners. “This is the reason why tech startups have grown their businesses manifold and many have even turned the corner on profitability. They are now ready to raise funding and provide exits to early investors via IPOs in 2021-2022.”

ET reported last month that Orios Venture Partners, which has invested in companies like IPO-bound online pharmacy PharmEasy, recently raised $30 million in additional capital to exclusively back its high-growth, standout portfolio companies.

This is a trend that is widely being played out among small-sized domestic seed and early-stage venture capital funds to keep their shareholdings from getting diluted, as companies raise capital at steep valuations in large financing rounds.

“For Indian startups, the product launch and scaling up cycle have become shorter, with many growing faster than expected and accessing capital to fund their growth ambitions,” said Sudhir Sethi, founder and chairman of Chiratae Ventures. Chiratae has backed companies like Lenskart, Policybazaar and Firstcry, all of which are likely to go public in the next year or two. Over $500 billion worth of capital is expected to flow into Indian startups over the next five years from VC and PE funds, Sethi added.

Also Read: Chiratae Ventures to offer 48-hour turnaround on seed fund requests

Enter the Unicorns

The year so far has also churned out as many as 16 unicorns including BrowserStack, Cred, ShareChat, Meesho, Urban Company, PharmEasy, Zeta, ChargeBee, Gupshup, Groww, Moglix, among others. In 2020, nine new unicorns were born while 2019 saw the entry of eight startups to the unicorn club, the Venture Intelligence data showed. Keeping in mind the boosterish sentiments, founders have been forced to accommodate more investors and expand their round sizes.

For instance, when ed-tech platform for tutors, Classplus, was out to raise capital earlier this year, it had to close the round at $65 million, significantly higher than planned, led by US investment firm Tiger Global Management.

“It is good to see investors across all stages placing trust and conviction in the Indian startup landscape. With the internet economy here to stay, this is a great place for the founders to create significant value for consumers and stakeholders,” said Mukul Rustagi, co-founder and CEO of Classplus.

On Tuesday, digital payments provider Pine Labs raised $315 million in fresh capital as part of its ongoing fundraising, closing the round at $600 million.

This came within a month of closing a secondary fundraise of $285 million from investors such as Baron Capital Group, Duro Capital, Marshall Wace, Moore Strategic Ventures and Ward Ferry Management.

“Covid-19 has truly accelerated the digitisation of merchants who are now not only going for digital payments but are looking at all levels of digital support, and this is an opportunity for us in India's fintech space,” said Amrish Rau, the chief executive of Pine Labs.

Spillover Effect

Many believe that the latent demand created during the pandemic has spilled over into 2021.

In the past few years, funds were relatively cautious in cutting larger cheques, primarily because the pace of digital adoption was still slow. The onset of the pandemic has, however, brought forward the need for adoption and enabled the rapid expansion of the digital ecosystem.

“The record growth in funding inflows is driven by the impact, potential, and ‘Covid-resiliency’ of these upcoming companies and we expect this momentum to continue,” said Ankur Pahwa, partner and national leader for ecommerce and consumer internet sectors at EY India.

Pahwa said companies in various stages of growth have all managed to attract funds, pointing to their growing influence, especially in segments such as edtech, healthtech, agritech, social commerce and hyperlocal delivery.

The Venture Intelligence data showed that the ecommerce sector saw the most capital inflow at $4.15 billion in the last six months, while $2.3 billion flowed into fintech companies, $1.9 billion into logistics and $1.6 billion in enterprise software firms.

“These segments are likely to continue to attract investments in the near future as they are gaining mainstay relevance and will be a crucial peg in our adoption to the post-pandemic world,” Pahwa said.