Startups in India seem to be having a great time currently, at least in terms of their being able to raise funds from investors. Some are ascribing this to the mega $16 billion deal which saw the US retail giant Walmart acquire a pureplay Indian e-commerce startup Flipkart. Whether that is the key turning point or not, the fact remains that the venture capitalists have been loosening their purse strings on Indian startups as evidenced by the figures. The funds raised by Indian startups in first half of 2019 stood at $3.9 billion, just $300 million less than what they got in the whole of 2018, which was $4.2 billion.
There’s a separate statistic which shows that there has been a 44% jump when you consider 292 deals entered into, by Indian startups.
For the record, these investments include the entire category of investments, starting from seed capital to early stage investments right up to the Series F fundraising.
The other key factor for this spurt in investments in the startups could be that in the years since these companies came into existence, there has been the segregation of the men from the boys. The ones that managed to do well and crossed the breakeven points are automatically the ones the investors seek to invest in.
Some amount of sorting out has also happened by now; there are those with large direct consumer bases in the B2C segment and the ones that are operating in the B2B space. Then there are the business verticals or segments, like fintech, agritech, healthcare and so on. Areas like software and logistics are typically in the B2B model while there are quite a number, led by startups like Swiggy and Ola who have a customer base comprising people of different age groups and socio-economic classes.
Another significant outcome to emerge out of these experiences is that the investors have come to appreciate the potential the tier 2 and tier 3 cities offer in the Indian context, and how startups that can exploit this potential too received their attention.
The rub-off effect from the Walmart-Flipkart deal cannot be underestimated either. The VCs and other investors who reaped huge gains from that deal have ploughed back their earnings into other startups. Others who have been on the fence watching the Indian startup scene develop have also gained confidence from the Flipkart deal and have opened up.