The Covid-19 pandemic — and a handful of other factors — slowed dealmaking for startups in India this year.
Compared to their record $14.5 billion fundraise in 2019, Indian startups are ending 2020 with about $9.3 billion. This is the first time since 2016 that startups in India, one of the world’s largest startup communities, has raised less than $10 billion in a year.
The number of deals fell from 1,185 last year to 1,088 in 2020. There were fewer larger sized rounds, too. Rounds with deal size $100 million or larger fell from 26 in 2019 to 20, and similarly, rounds with deal size $50 million to $100 million fell from 27 to 13.
Despite the slowdown, Indian startups saw a substantial rebound in the second half of this year. In the first half, startups in the world’s second-largest internet market had raised just $4.2 billion from about 461 deals, said Tracxn.
Other than the coronavirus, which has impacted startups worldwide, another factor that impacted the dealmaking was the absence of — or reduced participation from — some of the biggest investors.
Chinese giants such as Alibaba — and its affiliate Ant Group — and Tencent wrote fewer checks this year to Indian startups amid tension between the two neighboring nations. SoftBank also delivered less capital as many of its high-profile portfolio firms, including Paytm, Oyo Rooms, and Ola, did not raise money.
But the virus also accelerated the growth of some startups. Byju’s is now valued at over $11 billion, up from $8 billion in January this year. Unacademy, another high-profile startup in the online learning space, raised two rounds at the pandemic height, increasing its valuation from about $500 million in February this year to over $2 billion.
11 Indian startups, including RazorPay, Unacademy, DailyHunt, and Glance, became a unicorn this year.
“I am old enough (unfortunately!) to have seen the 2001 and 2008 downturns, so when Covid hit, and there were stories of doom and gloom everywhere, I remembered what I saw happening in the past downturns — a beginning of a new generation of teams who built the next generation of companies,” said Vaibhav Domkundwar, founder and managing partner at Better Capital. Better Capital, which backs early-stage startups in India, wrote 43 investment and follow-on checks this year.
M&A activities also accelerated this year. Byju’s acquired WhiteHat Jr for $300 million, while Unacademy acquired PrepLadder, which offers medical students courses for $50 million in July. It also led an investment round of $5 million to acquire a majority stake in Mastree.
Reliance Industries acquired online pharmacy Netmeds and, in a fire sale, Urban Ladder.
But for the first time, Indian startups are on the verge of seeing another kind of exit. Zomato, Flipkart, and Policybazaar are among some startups that plan to go public next year. Analysts at Bernstein have identified Paytm, Byju’s, PhonePe, and Delhivery among those who could also go public by 2022.
