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Startup funding in India has been on a tear in 2021. The first hundred days of the year have already produced ten unicorns- firms valued at over a billion dollars or more- compared to 11 in all of 2020. The period between April 3-April 9 2021 in particular saw frenetic activity, with $2.65 Billion getting invested across 21 deals, according to data from Venture Intelligence.
4 consecutive days between April 5-8 birthed 6 unicorns. Of these, 4 were backed by Tiger Global and 3 were backed by Sequoia India, which is also the most active investor in Indian startups so far this year.
The main factors driving the boom
Post pandemic, a new leaf. While the Covid-19 pandemic crippled all companies and some companies are still recovering, the majority of internet companies have emerged stronger. A rise in internet users as people stay at home has led to rapid growth for all online services - from commerce to payments to software. Investors are betting on this growth to continue.
Tiger roars again- Tiger Global, the American investor famous for its early bet on Flipkart is driving the current frenzy singlehandedly. It has led or invested in half the unicorns this year- Groww, Cred, ShareChat, Infra.Market, Innovaccer and Gupshup, with many more to come. Its aggressive brand of deal-making- issuing term sheets after a short call, backing competitors and pushing up valuations to enter rounds- are back.
Capital everywhere- Nearly every large venture fund raised an India dedicated fund last year, including Sequoia, Accel and Lightspeed. Others are raising, and even those without India dedicated funds are increasing their share of India allocation, and are hiring investors locally- sign of long term plans.
What after China and US?
A global backlash against China and a maturing market has led many investors to reevaluate their strategies. These investors- VCs, hedge funds, pension funds, etc- seem to be betting that India is the next big emerging market where internet companies can get big fast. It is also one of the largest consumer markets that still has potential for emerging players whereas US and China are highly mature and already dominated by incumbents. The sheer size of India and rising internet adoption gives startups a huge TAM (total addressable market) to play in.
For the longest time, startup IPOs in India have been a mirage. Companies have spoken about them as a distant goal but no real desire to go public was seen. In the next year, at least 3-4 companies- Zomato, Nykaa, Delhivery and Policybazaar are expected to go public, prompting a new wave of capital given that startups are finally showing a stable exit path for investors.