Indian tech startups have potential to reach $200 billion revenue in next five years: Chiratae's Sethi

Esben H Østergaard. Founder & Chairman, IDG Ventures India Photo by Nishant Ratnakar for Forbes India 10/05/2017

Technology startups based out of India have the capability to reach a revenue scale of as much as $200 billion in the next five years, according to Sudhir Sethi, founder and chairman of Chiratae Ventures Advisors.

There is an inherent infrastructure working at scale in India and technology companies, in the larger scheme of things, tend to grow faster in most cases, Sethi said speaking at the Digital India Week 2022.

"We did some research and we have data as of March 2021. The revenue of all technology startups in that year was $20 billion. This grew from $4.5 billion in 2007. That's a 34 percent CAGR (compound annual growth rate)," he said.

"We also did something interesting and we said hey, how will this look in the next five years? In the next five years, we expect this (current startups) and new companies, which are coming in the startup ecosystem in technology to reach a revenue scale of anywhere between $150 and $200 billion. This is all Indian startups, this does not include companies structured outside the country," Sethi added.

He further said that the estimates do not include software services companies either. Software services companies, which managed to clock $237 billion in revenue last year will be around $350 billion in the next five to six years, Sethi said.

"New tech economy or digital economy is about new business models, new revenue models, new products, new technology, new go to markets and also discovering new markets," he added.

"And yesterday, five years ago, this used to be for investors like us possibly in an odd situation. But today we have seen entrepreneurial organizations chugging along rapidly, where a bulk of these are now met. That means all these criteria are an add situation innovation, agility on all these criteria and that's the fuelling that's happening in the country," Sethi said.

He also said that in the next five years, there will be at least 25 new-age technology companies that will have a revenue of at least $1 billion each from domestic and international markets. Sethi added that Chiratae expects venture equity capital to grow about 10 percent, despite the slowdowns and added that he expects it to touch $400 billion in the next five to six years from about $150 billion, which was invested over the last seven years.

His comments come at a time when venture funding at later stages to India's startups is slowing amid an overall slowdown in global financial markets. Moreover, investors are getting more cautious about the revenue growth of startups and are advising their portfolio companies to conserve cash and focus on profitability. Valuations of private technology companies are also correcting in line with plunging shares of publicly-listed companies across the globe.

"A lot has been spoken about valuations. I am excited about valuations. But valuations keep going up and down. But valuations are an outcome. What is manageable is revenue and financial performance," Sethi said.