Lower funding but no lack of ambition for Indian start-ups in 2020

Darren Sinden

Despite the challenging climate seen in 2020, India created 11 new Unicorns or businesses with a valuation equal to or in excess of a billion dollars

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Whilst start-ups in the UK, Europe and the USA all enjoyed a funding boost in 2020 tech businesses in India didn’t fare so well it seems according to a year-end tally compiled by consultancy Tracxn.

Indian firms received just $9.30 billion of external funding over the last year, a figure that was sharply lower than the $14.50 billion of investment that the country’s start-ups attracted in 2019. That shortfall represents a 36% drop in the amount of new money made available.

Not only was there less money to go round, but there was also a lower number of deals on the table although the difference between 2020s 1088 deals and 1185 seen in 2019 was marginal compared to the funding gap.

The number of funding rounds that attracted investments of $100 million or more, the so-called mega-rounds, also dropped falling by around third to 20 deals from 2019s 29 mega-rounds.

These large scale funding rounds raised considerably less money than their 2019 counterparts as well, with total funding of $3.60 billion in 2020, compared to the $7.50 billion that was secured in 2019.

The silver lining for Indian tech start-ups was the second half of 2020 was far better than the first half and that potentially bodes well for 2021. However, one other notable feature of 2020s funding rounds was the frequent absence of some of the world’s largest and most prolific investors including Alibaba & Ant Group, Chinese rivals Tencent and Japans Softbank.

Chinese investors wrote fewer cheques for Indian business as border tensions between the two countries simmered and on occasion spilt over into violence.

Despite the challenging climate seen in 2020, India created 11 new Unicorns or businesses with a valuation equal to or in excess of a billion dollars. New Unicorns included payments gateway Razorpay, online learning platform Unacademy. Personalised ad-vendor Glance and nascent content market place DailyHunt.

If Chinese investors shied away from Indian techs business this year US firms had no qualms in stepping up to the plate with both Google and Facebook investing on the subcontinent.

Google backed both Glance and DailyHunt, whilst Facebook put money into Unacademy and both US firms funded one of India’s largest telecoms businesses Jio Platforms. With Google committing to buy just under 7.75% of the business for a consideration of $4.50 billion.

Google and Jio Platforms will work together to create low-cost versions of Google’s Android operating systems and entry-level smartphones for the Indian marketplace. Jio Platforms, which is run by Mukash Ambani India’s richest man, has amassed more than 400 million subscribers for its existing services which include TV on-demand, music streaming and online payments apps.

Another high profile start-up that attracted funding from US backers was on-line learning App Byju. The business helps to prepare students for graduate and undergraduate courses and has been expanding into senior school-age education too. Byju also has its sights set on the pre-school market as well, having acquired US-based Osmo which develops Apps, educational materials and services for younger children.

Overall India’s tech scene may have been forced into an effective hibernation by the pandemic in the first half of 2020 but both investors and deals have returned to the market in the latter part of the year. The start-up culture doesn’t attract as much overseas publicity as it should but it’s an ecosystem that’s full of ingenuity and opportunity and it certainly shouldn’t be overlooked in 2021 and beyond.

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