Indian Startups Got Rs 75,000 Crore VC Funds In 2020; These Sectors Received Highest Fundings

India clocked VC investments of nearly $10 billion in 2020 despite the Covid-19 induced lockdown.

Sectors Continue To Lead The Economy

As per the India Venture Capital Report 2021 by IVCA and Bain & Company, it also is the highest in recent years after 2019.

These findings reveal that there was momentum observed in the consumer tech and SaaS space.

Since, VC investment in consumer tech and SaaS incremented by 25 percent and 10 percent, respectively, in 2020 Vs 2019.

Apart from this, the Indian-focused funds raised $3 billion in the year which is 40 percent higher than 2019.

The VC report said, “In terms of key sectors receiving investments, consumer tech, SaaS, and fintech continued to lead the way, accounting for 75% of VC investments in 2020 vs. 65% in 2019. Fourteen of 22 VC deals were more than $100 million in size,”.

“Key sub-sectors receiving investments included edtech, foodtech, gaming, and media and entertainment in consumer tech; verticalized solutions within SaaS; and payments within fintech. SaaS, in particular, saw clear signs of maturity, with average deal size increasing dramatically in 2020 over 2019—$14 million in 2019, growing to $25 million in 2020,” the report added.

Growth In Indian Economy

With these developments, now India stands amongst the top five startup ecosystems globally.

To support that, over 7,000 new startups were founded in 2020, along with a 13 percent growth in seed-stage deals.

In addition to that, 2020 also saw the largest ever increase in unicorns in a single year, which is 12 unicorns compared to eight in 2019. 

With these latest additions, now India is home to in total of 37 unicorns.

Despite the investors being bullish, the average deal size in 2020 declined by 15 percent Vs 2019, driven by a higher number of smaller deals.

Growth In Investment

“Going forward, we expect deal momentum in India to continue into 2021, with the second half of 2020 seeing deal activity recover to pre-Covid19 levels—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,” the report said.

Further, the report added, “the number of active VC funds continued to grow in 2020 – at 520 vs 480 in 2019, with multiple new funds investing such as Inflection Point, Avataar, Coatue, D1 Capital, amongst others,”.

The year also witnessed a slowdown in VC exits – down 70 percent from $4.4 billion in 2019 to $1.3 billion in 2020 caused by the depressed valuations and disruption of operations of startups. 

Although, the recovery is expected by the next 1–2 years as portfolios mature.