Year-ender 2020 |Here's why 2020 had the lowest number of deals in the last five years

The global pandemic managed to slow down deal-making in the Indian startup ecosystem both in terms of the amount of money being pumped in and the number of deals closed.

Data sourced from business intelligence platform Venture Intelligence show only $10.6 billion worth of VC money being pumped in this year, compared to more than $12 billion last year.

Even 2018 and 2017 saw $10.9 billion and $10.7 billion getting pumped into the sector. In terms of the number of deals, only 648 VC deals were signed in 2020, making it the slowest in terms of deals signed over the last five years.

While edtech grabbed the maximum attention, with Byju’s Classes getting more than a billion dollars of VC money through four deals during the year, food-delivery major Zomato came second with around $660 million raised from large investors.

In terms of sectors, ecommerce emerged as the favourite among investors, attracting $2.3 billion across 85 companies followed by edtech with $2 billion across 57 companies.

Edtech steals the show

Byju’s rode the edtech wave and raised two big rounds in the middle of the pandemic from investors such as Tiger Global, Silver Lake and others. The online education platform got another round of $200 million from General Atlantic in February 2020, just before Covid19 struck, and $300 million from Tiger Global in January.

Budget hotel chain Oyo got around $500 million from Softbank in March, before the full impact of the virus was felt here. Since then the company has also seen a massive hit on its business as travel came to a standstill through much of 2020.

While other companies that raised massive rounds were from sectors that benefited during the pandemic, Zomato was an outlier. At a time when food and beverages as an industry got ravaged by Covid-19, the restaurant discovery and food delivery platform managed to get around $660 million from prominent investors. Among them were Tiger Global, Temasek, Kora Managements and Steadview Capital. It also spoke about hitting the public markets by 2021.

Among the other players with big fundraising rounds were fantasy gaming platform Dream11, software as a service startup Zenoti, ecommerce player Ecom Express and used-car selling platform Cars24.

Fintech still hot

While consumer-facing startups managed to get the big cheques, in terms of the number of deals, fintech is still getting a lot of attention from investors, with 92 companies getting funded. Players such as Cred and Razorpay emerged as the leaders, riding the wave of digital payments and fintech lending. Razorpay marched into the unicorn club this year.

In terms of the amount of money pumped in, ecommerce continues to be most attractive, with $2.3 billion across 85 companies. Edtech got more than $2 billion being put in across 57 companies, followed by $1.7 billion invested in 31 companies in the logistics space.

Among the large VCs active in the country, Softbank pumped in the highest amount with almost $800 million deployed across companies such as Policybazaar, Unacademy and Oyo Rooms. Tiger Global has deployed $529 million across companies such as Razorpay, Chargebee and Dream11, followed by Sequoia Capital, which has put in $342 million in Bounce, Freshworks and Cardekho, among others.

A year like no other

Venture capitalists have pointed out that during the first few months of the pandemic deal making was stuck; but as things eased up and restrictions were relaxed, deals started flowing.

Reliance Jio raising billions of dollars from Facebook, Google and others made global VCs sit up and take notice of the opportunities in India. Further, with the deterioration in relations between India and China and the US and China, many deals started flowing into India from the West.

2020 also was the year when deals started getting finalised over video calls and digital signatures, something unimaginable in the pre-Covid days. So, even when partners of VC firms could not travel to visit companies, they were ready to strike deals remotely.

Another important trend spotted by tech investors was the rapid pace of digitisation caused by the pandemic, which opened fresh disruption opportunities for startups. Hence, VCs keen to get a share of the pie were ready to loosen their purse strings. This helped get deals signed quickly in the latter half of 2020.