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Indian Startups On Track To Record Historical Peak With $13.7 Bn Funding In 2021

Indian Startups On Track To Record Historical Peak With $13.7 Bn Funding In 2021

Total funding amount in Indian startups touched the $70 Bn mark across 5,985 funding deals between 2014 and 2020

With 11 startups earning $1Bn-plus valuation in 2020, the year was the best ever for unicorn creation in India

What is in store for Indian startups by the end of 2021 as the market recovery forces come into play?

Mass hysteria, soaring unemployment rates and piling business loss — this was the case for most traditional industries in 2020. On the contrary, tech-led new-age sectors witnessed an most unprecedented surge among consumers and businesses. In short, the internet economy was the chief benefactor of the new market conditions created by the pandemic.

In India, this transformation was led by startups and tech companies. Although the pandemic had an impact on the number of new startups launched, which fell by 70% from 3,500 (2019) to 1,050 (2020), Indian startups recorded a total funding of $11.5 Bn, which is just 10% lower than 2019. Given the severity of the pandemic, this amount is not discouraging by any means, given that the Indian startup ecosystem saw 924 deals in 2020, 14% higher than 2019.

As we had predicted in an earlier Inc42 Plus report — The State Of Indian Startup Ecosystem 2020 — in an optimistic scenario, the total funding amount in 2020 would reach $11.3 Bn (which was 11% lower than 2019). So, the startup ecosystem has performed slightly better than expectations. But 2020 was a story of two halves for Indian startup funding, with a big recovery in the second half of the year after a slow first six months.

With a modest fall of 10% (2019 to 2020) in the total venture capital inflow in Indian startups, this year (2021) is estimated to record a total funding amount of $13.7 Bn across 1,044 funding deals. In essence, the total funding raised by Indian startups since 2014 would rise to $83.4 Bn, with a total deal count of 7,029.

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Indian Startup Funding To Reach Historical Peak In 2021

Given the historic trends and the funding growth over the past year, we estimate Indian startup funding (amount) will see its best year in 2021, which would be 4% higher than 2017, currently the historical peak for funding with over $13.2 Bn recorded in the calendar year.

Indian Startup Funding Prediction In 2021

The massive surge — the biggest in nearly five years — in funding amount will be primarily backed by mega deals ($100 Mn+) invested in growth and late stage startups from sectors such as ecommerce, fintech, enterprise tech, edtech, consumer services and healthtech. For deal count growth, the seed stage ecosystem will need to maintain the same momentum seen in 2020.

India’s Startup Hubs Beyond Bengaluru, Delhi NCR and Mumbai

Bengaluru, Delhi NCR and Mumbai are easily the most dominant startup hubs in India, with a combined 90% share in the total funding secured between 2014 and 2020.

These hubs have progressed and matured thanks to the high availability of human capital as well as venture capital, which also bodes well for these cities in terms of new startup launches.

Emerging Startup Hubs In India 2020

From a macro perspective, the overall adoption of internet-based products and services is no longer contained only to the top three startup hubs in India which are Bengaluru, Delhi NCR and Mumbai. This change in the consumption pattern of Indian public has widened up the opportunity for tech-enabled products and services to expand their user base beyond the digital borders of the top three startup hubs in India.

Chennai is already home to the most prominent SaaS companies in the country including the likes of Zoho, Freshworks, Chargebee, Kissflow and others. The vibrant SaaS ecosystem in the city has created a valuable proliferation of both the talent pool and startup investors in Chennai. Unsurprisingly, the enterprise tech sector, which ecompasses both vertical and horizontal SaaS along with other B2B focused services, is the top sector in Chennai.

The overall funding amount and deal count in Chennai is $1.8 Bn and 220 funding deals respectively. Although the overall funding amount in 2020 ($279 Mn) is lower compared to 2019 ($332 Mn), the deal count on the contrary has surged 40% during the same period.

More details on the emerging startup hubs in India, the top-performing startup sectors, growing investor participation and India’s burgeoning soonicorn club (startups with potential to reach $1 Bn plus valuation by 2022) is available in our comprehensive study of the Indian startup funding ecosystem from 2014 to 2020 — The Annual Indian Tech Startup Funding Report 2020.

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