The coronavirus pandemic – and a handful of other factors – slowed dealmaking for startups in India this year.
Compared to their record fundraising drive of $ 14.5 billion last year, Indian startups ended 2020 at around $ 9.3 billion. This is the first time since 2016 that startups in India, one of the world's largest startup communities, have raised less than $ 10 billion a year, according to consulting firm Tracxn.
The number of deals fell from 1,185 last year to 1,088 in 2020. There were also fewer larger rounds. The rounds with a deal size of $ 100 million or more dropped from 26 in 2019 to 20 (those rounds delivered $ 3.6 billion this year versus $ 7.5 billion last year), and the rounds with a deal size from $ 50 million to $ 100 million also fell from $ 27 to $ 13. (The numbers exclude investments in telecommunications giant Jio Platforms, which raised over $ 20 billion this year alone.)
Despite the slowdown, Indian startups recovered significantly in the second half of the year. In the first half of the year, startups in the world's second largest Internet market had only raised $ 4.2 billion from around 461 deals, said Tracxn.
Aside from the coronavirus that has affected startups around the world, another factor that has affected dealmaking has been the lack of, or reduced participation, from some of the largest investors.
Chinese giants like Alibaba – and its subsidiary Ant Group – and Tencent have written fewer checks to Indian startups this year amid tensions between the two neighbors. SoftBank also delivered less capital as many of its high profile portfolio companies, including Paytm, Oyo Rooms, and Ola, failed to raise funds.
But the virus also accelerated the growth of some startups. Byjus is now worth over $ 11 billion, compared to $ 8 billion as of January this year. Another high-profile online learning startup, Unacademy kicked off two rounds at the height of the pandemic, increasing its valuation from around $ 500 million in February this year to over $ 2 billion.
Bond, a company founded by Mary Meeker and other high profile investors, sponsored Byjus this year. Bond believes Byjus will be worth over $ 30 billion in three years, a person briefed by the investment firm told TechCrunch. Several startups in India that operate on a SaaS model and serve customers worldwide have also picked up speed this year.
11 Indian startups, including RazorPay, Unacademy, DailyHunt and Glance became a unicorn this year. (As an aside, Google and Facebook have written several checks to Indian companies this year. Google sponsored Glance and DailyHunt last week, while Facebook invested in Unacademy. Both companies also invested in Jio Platforms this year.)
“I'm (unfortunately!) Old enough to have seen the 2001 and 2008 downturns. When Covid hit and there were stories of doom and gloom everywhere, I remembered what I had seen in the past downturns – the beginning of a new generation of teams that built the next generation of companies, "said Vaibhav Domkundwar, founder and managing partner of Better Capital. Better Capital, which supports early-stage startups in India, has issued 43 investment and follow-up checks this year.
M&A activity has also accelerated this year. Byjus acquired WhiteHat Jr for $ 300 million, while Unacademy acquired PrepLadder, which offers courses for medical students, for $ 50 million in July. It also conducted a $ 5 million investment round to acquire a majority stake in Mastree.
Reliance Industries acquired the online pharmacy Nedmeds and Urban Ladder as part of a fire sale.
But for the first time, Indian startups are on the verge of another exit. Zomato, Flipkart, and Policybazaar are among the startups looking to go public next year. Bernstein's analysts have identified Paytm, Byjus, PhonePe and Delhivery as the ones that could also go public by 2022.