Indian Start-Ups raised a record $20+ Billion in 7 months

Quants are conventional numbers people: they only buy securities that fit statistical criteria. Venture capitalists are stories people. They provide finance to technology startups that may have great potential but do not—or do not yet—have the numbers to back it up.

A flood of foreign money is washing into India’s startup scene. Flipkart, an e-commerce site, has just raised $3.6bn in a record-breaking funding round. There has been a wave of public listings this year, as fledglings take advantage of India’s buoyant stock market to raise capital and provide an exit for their venture-capital backers. The recent initial public offering of Zomato, a food-delivery firm, was heavily oversubscribed. Paytm, a much-touted payments app, is due to list soon. Microsoft has finalised a strategic investment for an undisclosed amount in SoftBank-backed Oyo Hotels & Homes, valuing the hospitality company around $9 billion.

This burgeoning interest in India owes a lot to the diminishing appeal of China, whose tech firms are facing a regulatory backlash. To outsiders, India seems like a younger, more freewheeling China.

Over the past few weeks, it’s become clear that Indian startups are in the midst of a funding deluge in 2021. More than $10.8 Bn in funding was raised by Indian startups in the first six months of 2021. But that is set to be surpassed by the Indian startup funding spree in the past four weeks, where over $9.75 Bn has been raised over 130 disclosed deals. The total funding raised by Indian startups in 2021 has now risen to $20.55 Bn, which means, on average, Indian startups raised $100.2 Mn per day this year.

As the post-pandemic market drives adoption of technology solutions by businesses and consumers, the funding for Indian startups that continue to exhibit user and revenue growth is expected to continue rising in 2021 and 2022. This has also resulted in a wave of mergers & acquisitions in the India startup ecosystem, with the latest example being BYJU’S $500 Mn acquisition of US-based learning platform Epic.

As seen in our H1 2021 report, with 614 deals, half-yearly funding and deal count were at their historical peak. Compared to the year-ago period (H1 2020), total funding amount in H1 2021 surged 2.1x, while it recorded a 72% increase compared to H2 2020.

India’s tough business climate thus breeds a certain commercial flair, which its best startups exhibit. The other element is engineering chops. India’s computing talent is in design rather than patent-level technology. Add a dash of venture capital to these elements and, with luck, the result is a company with a true competitive advantage that can be exploited in India and beyond.

India has undeniable strengths – Its computing and commercial talent makes it natural territory for venture capital. The potential to spawn game-changing start-ups is there. But the money flowing into venture capital worldwide is not really seeking originality. Like a Hollywood producer, it prefers to back variants of ideas that have already been hits.