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Indian Startups raise Record-breaking $10.9 Billion in Q3 2021

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Indian startups have made a bountiful harvest in the third quarter of 2021. Amid pandemic-induced rise in digitisation, investors, both global and local remained confident on the prospects of India's internet economy in the third quarter of 2021. Companies got a total of 10.9 billion in investment across 347 deals, setting a new high record. This is over double the amount of funding received in the third quarter of calendar year 2020, and a 41% increase over the second quarter of 2021.

All industries saw an increase in funding activity, both in terms of value and volume. Fintech, edtech, and SaaS, on the other hand, are the top three hot investment industries in CY21, accounting for nearly half of all fundraising activity. In the first three quarters of CY21, the fintech sector raised four times as much money as it did in the first three quarters of CY20. Six fintech firms have been designated as unicorns.

Discussing the investment in startups 2021 thus far, Amit Nawka, Partner–Deals & Startups Leader, PwC India, said, “Start-ups have leveraged the accelerated digital adoption seen amongst businesses and individuals alike to create newer business models and this is driving investor interest in a big way. We are seeing the average deal size increase and quicker funding rounds which has led to a surge in deal activity across sectors, since early this year.”

Fintech, edtech, and software-as-a-service were some of the outliers (SaaS). In the three months ending September 30, the three sectors combined accounted for over half of all funding activity.

A snapshot of startup perspectives during the third quarter of CY21

Fintech: In the first nine months of 2021, India's financial technology market raised $4.6 billion, about four times more than the same period the previous year. In just the third quarter, 53 deals were reported. Insurtech, healthtech, neobanking, and other fintech offshoots drew investment attention. Fintech and financial services firms raised $2.24 billion in 70 deals in Q3 2021. Edtech ($1.40 billion, 50 acquisitions) and healthtech ($974 million, 49 deals) are next.

Digit Insurance, Five Star Finance, Cred, Groww, Zeta, and BharatPe are among the six fintech unicorns created so far this year, according to ETtech.

Edtech: Since the Covid-19 outbreak struck early last year, India's education technology (edtech) startups have been dominating the roost in terms of acquiring large sums of money from investors. This year's trend appears to be in the same direction. The figures speak for themselves. According to statistics from analytics firm Tracxn, edtech companies received $3.81 billion in funding between January and August 2021, roughly a four-fold increase from $971.5 million in the same time last year. The number of users and engagement metrics have skyrocketed, resulting in a concentration of startups raising financing and market consolidation. Byju's, an edtechdecacorn, is the country's most valuable startup and is rumoured to be considering an initial public offering (IPO) next year. UpGrad, Eruditus, and Vedantu, its lesser competitors, all become unicorns this year.

SaaS: Freshworks, the poster child of Indian SaaS, went public on the Nasdaq last month, despite its indigenous competitors Postman, Innovaccer, and WhatFix raking in cash. According to the PwC research, this industry has garnered the most investment.

Foodtech: Zomato has become a publicly traded company, Swiggy has raised millions of dollars, and Rebel Foods has become a unicorn as a result of the post-pandemic rebirth in the internet food services market. Other cloud kitchens have gotten a lot of traction and interest from investors.

E-commerce (B2B): In 2021, big agreements by Udaan, Meesho, Zetwork, Infra.Market, and Moglix drove a nearly seven-fold increase in capital for startups engaged in B2B e-commerce.

D2C Retail: Given the changing behaviour of purchasers, a number of new players have achieved success and acquired finance in the last 12–15 months. In global e-commerce, Covid-19 has caused inflexion points. Consumers seeking safety and convenience have flocked to e-commerce platforms in increasing numbers. India is one of the world's largest retail markets, with an estimated $850 billion in sales and a predicted $1.7 billion by 2025. In the next five years, the e-tail business is likely to spearhead the change to organised retail.

Funding stages

Growth- and late-stage companies accounted for around 89 percent of total funding activity so far this year in terms of value, while volume accounted for 39 percent of total transaction activity. So far, pre-IPO fundraising has totaled almost $880 million.

Bangalore, India's Silicon Valley, has always been a hub for entrepreneurs, innovative companies, and creative-minded individuals. The increase in the number of innovative early-stage and established businesses can be ascribed to the city's expansion. Startup accelerators and incubators are also important factors in the success of entrepreneurial ventures. As a result, Bangalore's international recognition would not have been conceivable without these incubators and accelerators. Bengaluru and Delhi NCR (National Capital Region) continue to be India's most important startup locations, accounting for 76–78 percent of overall investment activity in the first three quarters of both 2020 and 2021, respectively, followed by Mumbai and Pune.