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The last year was noteworthy for the Indian VC industry, with some moderation over high growth seen in preceding years. There has been a significant growth in the number of small value deals (~500 deals <$5 million in value), which is a good indicator for the early-stage ventures across sectors. Over the last year, in total 22 start-ups in India raised over $100 million from the VCs across growth equity investors.
( Figures are from the report by Bain and Co)
When considering the key sectors attracting most investments, deepech, healthcare, consumer tech, SaaS, and fintech continued to lead the way. They account for 70-75% of the VC investment and growing in double digits every year. The various sub-sectors include
(a) edtech, foodtech, gaming, media and entertainment in consumer tech;
(b) Verticalized solutions within SaaS, including healthcare;
(c) Fintech and cybersecurity
SaaS, in particular, saw clear signs of moving ahead faster, with average deal size increasing to $25 million in 2020 compared to earlier years. Going forward, the deal momentum in India is expected to be stronger and reach pre-covid levels by the end of 2021. In 2019, reeling under the impact of covid, VC investments totaled $3 billion in January to March, declined to $1.1 billion in April to June, and then recovered to ~$3 billion each in the next two quarters.
Edtech saw multiple high-valued deals such as Byju’s, Unacademy, Eruditus, CueMath, ClassPlus, and Vedantu. Into the foodtech, Zomato’s $660 million deal drove up average deal size while large investments into Dream11 and MPL led to the surge seen in gaming and entertainment. This was supplemented with the number of active VC funds that continued to grow in 2020 to 520-525 nos and multiple new funds coming forward to investing like Inflection Point, Avataar, Coatue, D1 Capital, amongst others.
In the healthtech, wellness space, companies like Cure Fit, online consultation (Practo, Docs App), and digital therapeutics (Biofourmis) were the top segments attracting investments. The e-pharmacies witnessed VC traction in terms of majority stakes by corporates while 1MG got investment from the Tata Group and Netmeds controlling stake was bought by Reliance Retail.
Overall, the strength of India’s VC ecosystem continues to drive real economic value – VC investments are playing a pivotal role in bolstering the start-up ecosystem with deeptech, healthtech, and edtech at the forefront.