Fundraising by Indian start-ups went above Ten billion US dollars in a 3-month period for the 1st time in July-September 2021. This is due to investors both global and local who stayed bullish owing to the prospects of the country’s internet economy amidst a pandemic-induced rise in digitalization.

As per a PwC India report which was titled ‘Startup Perspectives – Q3 CY21’ New-age companies snagged USD 10.9 billion across three hundred and forty-seven deals in the 3rd quarter this year. This report was released on 18^th October 2021 and that is twice the amount raised in the year-ago period and forty-one percent higher when compared to the April-June period.

While India has become the 3^rd largest startup ecosystem globally, in the year 2020, the country added 3 unicorns each month marking a total count to fifty-one which was making the country move ahead of the United Kingdom (32) and Germany (18).

Apart from unicorns, however, the number of future unicorns called “gazelles” and “cheetahs” in India is growing at an exponential pace, said Anas Rahman Junaid, MD and chief researcher at Hurun India. A startup that is found after 2000 with the potential to turn into a unicorn in 24 months is a “Gazelle” and “cheetah” is a startup that would go unicorn in the next 4 years.  

“Startups have leveraged the accelerated digital adoption among businesses and individuals alike to create newer business models and this is driving investor interest in a big way,” said Amit Nawka, partner, deals and startups, at PwC India. We’re seeing an increase in average deal size and quicker funding rounds, which has led to a surge in deal activity across sectors, since early this year.”

However, there were some exceptions such as software-as-a-service (SaaS), fintech, & edtech and these 3 sectors together accounted for nearly fifty percent of the total funding activity in the 3 months, which ended September 30.

Indian Startups that have facilitated in raising USD 10 billion in a quarter

Fintech:

At USD 4.6 billion, the country’s financial technology industry recorded a near fourfold surge in fundraising in the 1st 9 months this year when compared to the year-ago period. 53 deals were clocked in the 3rd quarter alone. Enterprises in fintech offshoots such as insurance, wealth tech, neo banking, and many others garnered investor interest.

As per ETtech, 6 fintech Unicorns have been minted so far in 2021, and these include

• Digit Insurance
• Five Star Finance
• Cred
• Groww
• Zeta
• BharatPe

Edtech:

During the pandemic, the edtech industry sector has attained notable traction, where the user base, as well as engagement metrics, have risen manifold. This has led to the concentration of organizations raising funds and consolidation in the industry. While Byju’s - the highest valued startup in the country is said to be having an initial public offering sometime in 2022, it's smallest rivals that include Vedantu, UpGrad, & Eruditus obtained unicorn status in 2021.

SaaS:

As per the PwC report, the SaaS industry has attracted more investments, compared to any other sector. The poster child of India SaaS, Freshworks that was listed on the Nasdaq in September while the homegrown peers such as WhatFix, Innovaccer & Postman raked in investor dollars.

Foodtech:

While the post-pandemic revival in the online food ordering services sector has turned Zomato into a listed firm, made Rebel Foods - a unicorn, and drawn millions for Swiggy, other cloud kitchens have also achieved good business traction as well as investor interest.

E-commerce (B2B):

For the startups that are operating in the Business-to-Business eCommerce industry, there has been a seven-fold rise in funding and this was driven by large deals by Zetwork, Udaan, Moglix, Infra.Market, and Meesho this year.

D2C Retail:

Several new players in this sector have seen success as well as received funding in the past twelve to fifteen months, given the changing buyer behaviors.

Stages of funding:

In terms of value, about eighty-nine percent of the funding activity till now in 2021 was fuelled by growth-and late-stage companies. These depict thirty-nine percent of total deal activity in terms of volume. Pre-IPO fundraising stands at nearly Eight hundred and eighty million US dollars so far.

The Road ahead

The country’s demography, economy, & the government’s active support offers a wide spectrum as well as scope for setting up a thriving startup environment. India’s startup ecosystem contributes extensively to bolstering the economic condition by providing in the aspects that include:

• Creation of jobs
• Creation of wealth
• Expansion in GDP
• Expansion in export

The startup ecosystem in the country is flourishing at a rapid pace owing to the growth & advancement of Indian IT enterprises. Other factors include the capital and investors' availability coupled with the highly essential government policies and support.