India hosts the world's third-largest startup ecosystem which is growing at breakneck speed. It is driven by favourable tailwinds in digital adoption, domestic consumption, demographics, and the development of technology platforms for both overall consumption and niche use-cases.
The technology-enabled India growth story is globally acknowledged, rising on the shoulders of the IT industry and the Indian appetite for technology adoption. As a result, $35-36 billion has entered the system in 2021 alone and has resulted in an acceleration of trends already put in motion over the last decade and further speeded up by the pandemic.
2021 is seen as the year when India closed the tech loop. The policy and the technology startup ecosystem converged resulting in unprecedented value creation. India's capital markets regulator, SEBI, drove farsighted easing of regulation that allowed the public, hitherto primarily consumers, to participate in and perpetuate the Indian growth story.
Many companies and startups such as Nykaa, PolicyBazaar and Zomato listed on the stock markets with historic retail investment. At least 42 Indian start-ups have turned unicorns so far this year. Many of these unicorns will continue their path to list successfully in the coming years.
2021 also closed a successful decade-long technology democratisation movement. It is a movement that every Indian must cherish and look forward to in anticipation of what the next decade might hold.
2022 will supercharge this trajectory. Some trends that will come to the fore are:
- Metaverse everything – Ever since Facebook changed its name to Meta to cement the inexorable pull towards the metaverse, an unbelievable buzz has abounded on what this means. The amalgamation of Web 3.0 and Metaverse give rise to the possibility of physical reality and virtual reality (VR) merging seamlessly. People will enter a world where they will organize life and work in this merged reality, stepping in and out. Many startups, already working on lifelike VR platforms, are extending this metaverse concept to sectors like education, health, entertainment, and gaming. It is an exciting area to track and where large pools of capital will attempt to accelerate adoption.
- Cryptocurrency and blockchain – Non-Fungible Tokens (NFTs) have been the most prominent development globally this year and made this already hot sector hotter. Even though the possibility of using cryptocurrency in lieu of money is still remote, blockchain (BC) technologies have come to the fore as many crypto tokens are being circulated, supporting the issue and explosion of NFTs. As an asset class, NFTs have become mainstream and investible. Many countries are amending laws to allow investors to invest in NFTs and tax the gains of many who already have invested in this asset class. Many startups are building product, business and service models around this development and using BC technologies in banking, business, and other mainstream areas.
- Vertical e-commerce (VEC) – VEC platforms are specialized tech platforms for product groups, where individuals can easily access items of their choice and browse for alternatives, all at competitive prices. VECs build on their product depth and extreme specialization to offer exciting services to their ever-growing loyal consumer bases. With Nykaa's outstanding IPO, the discussion and input into the VEC space have accelerated even more. Younger VECs like Licious (disclosure: Pai is an investor 3one4 capital, which is an investor in Licious) and Mamaearth are growing faster and attracting growing pools of capital. 2022 will see more buzz around VECs and exciting new vertical offerings.
- Financialisation of the internet – As internet products and services become more mainstream and a greater part of everyday life, financial services will become more embedded in every app you use. From BNPL (buy now pay later) and micro-savings to the creator economy and payments for gaming, fintech will become a natural part of every internet workflow in everyday life. This trend is a natural corollary to internet platforms becoming the go-to experience for millions, especially in the wake of the pandemic. Banks and internet companies will come together via embedded fintech to compete for your attention, deposits, and payment flows.
- Consolidation in tech-enabled sectors – Consolidation is a natural phenomenon as large companies raise capital and take out competitors, and many smaller players fall by the wayside. 2021 saw this in several spaces like edtech and health tech. As IPOs become attainable goals for many prominent players, this is inevitable. In fintech, too, with capital infusion, there is room for the rapid growth of companies, continued disruption of the sector, and winners growing market share. Stand out players in every vertical will take every opportunity to consolidate services and provide new features to their consumer base.
We expect 2022 to build on the explosion of technology-enabled growth. The possibility of interest rate hikes in the US may dampen sentiments, but the momentum of technology-driven innovation is robust. The world is undoubtedly amidst a digital revolution, led by the US, China and India.
Pai is Chairman, Aarin Capital Partners, and Holla, a Technology Fellow, C-CAMP. Views expressed are personal and do not necessarily represent the stand of this publication.
Disclosure: Pai is an investor in 3one4 capital, which is an investor in Licious.
Discover the latest Business News, Sensex, and Nifty updates. Obtain Personal Finance insights, tax queries, and expert opinions on Moneycontrol or download the Moneycontrol App to stay updated!
