Indian Start-ups Raise a Whopping $36 Billion in 2021; Threefold Rise over 2020

In a day, the year 2021 will come to an end, and it is time to evaluate the annual success of start-ups. Let's take a look at the state of the Indian start-up ecosystem.

Indian start-ups put on a magnificent performance in 2021. As the demand for digitization escalated tremendously in the aftermath of the Covid-19 outbreak, India's start-up ecosystem witnessed unprecedented investment in privately held enterprises this year, amounting to over $36 billion. According to Preqin, a UK-based investment analytics platform, venture and private equity investments grew thrice over the year, surpassing the $11 billion lapped up by Indian start-ups in 2020.

According to the most recent data from Tracxn, a company that analyses start-ups and private firms, while the total number of start-ups founded during the time period was 3,476, around 1,700 organisations received 2,055 funding rounds.

In 2021, more than 40% (85) of all 'soonicorns' (businesses with the potential to become unicorns in the near future) were founded.

Flipkart ($3.6 billion), Paytm ($1.1 billion), Swiggy ($1.3 billion), Eruditus ($650 million), and Pine Labs ($600 million) received some of the largest rounds, excluding debt funding. Among the top 15 start-up concepts that received the most money from investors were social platforms ($1.4 billion), foodtech ($1.3 billion), and K-12 edtech ($1.1 billion).

This year, Tiger Global, Falcon Edge, Sequoia Capital, Accel, and Blume Ventures were among the most active investors, with Temasek, Lightrock, and Westbridge ranking first through third. SoftBank, famed for its huge investments, invested more than $3 billion in Indian enterprises in a single year, the Japanese investment firm's largest infusion in the nation.

Aside from an increase in transaction volume, Indian entrepreneurs secured larger financing rounds this year than in prior years, as risk capital organisations rushed in to make larger bets on high-growth companies early on. As a result, firms may now command greater valuations, with prices frequently doubling or tripling in subsequent rounds of fundraising.

Myriad of Unicorns

This year has seen the emergence of several unicorns, or firms valued $1 billion or more. A half-dozen entrepreneurs joined the unicorn club in four days in April, boosting the total number of unicorns to nearly 40. This year, however, it was not only unicorns that raised several rounds, but also high-growth companies, displaying a strong desire to back the leaders.

Licious, Cred, Groww, Cars24, Good Glamm Group, Spinny, Infra.Market, OfBusiness, and Pristyn Care are just a handful of the fintech companies whose valuations have increased in the last year.

Through 2021, the Indian start-up ecosystem improved dramatically in terms of founding team quality, market breadth, unit economics, and public market exit opportunities. As a result, investors at all stages felt more at ease signing larger checks and accepting greater risk.

With all of these resources at their fingertips, entrepreneurs have been able to move quickly to realise their goals for exponential expansion through inorganic tactics, both vertically and globally.

Web3/crypto, direct-to-consumer (D2C) brands, SaaS, edtech, fintech, healthcare, and business-to-business (B2B) commerce, which dominated in 2021, will continue to receive funding in 2022.

Most established organisations now have dedicated corporate development teams, and for founders, a sale is a possible exit route.

Prodigious Year for Tech IPOs

For a long time, when Indian entrepreneurs contemplated an IPO, it was not seen as a realistic route, but that changed in 2021. The year saw a watershed moment in the ability of technology-driven enterprises to enter public markets, with the majority of them also rewarded by public investors.

Smaller companies, such as gaming firm Nazara Technologies, went public this year, but food delivery service Zomato's Rs 9,000-crore IPO set the tone for at least a half-dozen top-tier startups to go public in India.

Others, including Paytm, Nykaa, and Policybazaar, have raised almost $2.5 billion from public market investors.

Sequoia India's MD, Rajan Anandan, previously asserted, “ten years ago, we had less than a billion dollars of funding going into startups every year. This year, we will have over $30 billion. And I credit a large part of it to the extraordinary focus that our honourable PM and the government have had on startups. The real startup India movement started accelerating in 2015.”

Indian founders are among the strongest in the world, and by 2022, India will play a significant role in facilitating cross-border commerce, fintech, cryptocurrencies, and new software categories such as PLG and infrastructure.