Indian startups have raised over $30 billion in 11 months of 2021 from investors, many times previous records and made billion-dollar startups commonplace, even as the unprecedented boom sparks fears of a bubble.
Privately held startups have raised $31.2 billion, nearly three times 2020’s $11.2 billion, and more than double the previous record of $13.1 billion in 2019. The number of deals however has increased in a less significant way, from 877 deals in 2019 to 930 in 2021 so far, as per data from Venture Intelligence.
The $30 billion mark was crossed when fantasy sports firm Dream Sports raised $840 million from Falcon Edge Capital, DST Global and others, valuing it at over $8 billion.
“No one could have guessed this kind of boom a year or two back. Digitisation and the rising online consumer base in India is a real opportunity for all investors. I think it will hit $40 billion this year,” said Anil Joshi, managing partner at Unicorn India Ventures, an early-stage investor.
2021 has seen 40 unicorns from India so far - privately held startups valued at over a billion dollars, compared to 26 unicorns in the entire decade prior. Once named for their rarity, unicorns have become mainstream, with businesses from real estate to software to job portals attracting frenzied funding
The funding boom, resulting in aggressive valuations for unproven business models and investors jostling to fund ideas they have not fully analysed has also created fears of a bubble, that some of these companies or valuations cannot sustain, which may trigger a broader bleak sentiment.
This sentiment was further exacerbated when after a wave of spectacular public share sales where sales were over-bought by hundreds of times, fintech firm Paytm’s IPO- India’s biggest so far, saw a tepid response, and its shares fell over 40 percent in days. Even after recovering it is significantly below the levels at which investors were sold shares prior to listing.
“I’m sure there will be a market correction. But I’m not too worried because fundamentally the internet economy will grow. So a 15-20 percent correction may happen, but the market fundamentals are there. I expect it (funding) to grow from here,” Joshi said.