Blog: Indias Venture Sector – 2022

The annual India Venture Capital Report for 2022, from Bain & Company, showed that the Indian startup sector is changing in a very positive way. Venture capital funding grew four times in 2021 versus 2020 and the total deal value was at 38,5 billion USD in 2021.

The growth is in both number of deals and size of deals. 1 545 deals were done in 2021 versus 809 in 2020. As for size, the average level was 24,9 million USD vs 12,4 million USD in 2020.  The number of new unicorns (companies with a valuation in excess of $ 1 billion) in India last year was 44, which is two more than China at 42. India now has 73 unicorns, versus US (+-500) and China (+-170).

The turning point in the Indian venture industry is partly driven by the large structural changes which was done a few years ago.

• Aadhaar – (personal number) has simplified a number of processes
• UPI – Unified Payments Interface has made digital payment simpe
• Jios intro into the mobile business have taken down data cost considerable and made the smart phone available for everybody

There is also an increasing depth in the start-up ecosystem and higher confidence in the market due to a number of exits. SEBI eased its regulatory norms and there were at least five large venture exits/IPOs done. The view for 2022 is a bit more soft, due to the large market headwinds we are seeing these days. Also, as the Chinese regulators tightened control of the technological industry, made India more interesting for foreign investors.

Consumer technology, fintech, and software as a service (SaaS) continued to account for 75% of all VC investments by value (in line with 2020).  These sectors continue to grow in a maturing landscape.     

• Within consumer tech, several alternative formats of commerce saw significant funding, such as video commerce, direct-to-consumer (D2C) brand aggregator models, and short-form videos
• Online business-to-business (B2B) marketplaces saw traction as four new unicorns were created—large opportunity size driven by the pandemic-led inflection in digital adoption within B2B supply chains
• SaaS funding continued to see momentum as several category leaders emerged, addressing unique use cases
• Within fintech’s record funding in 2021, consumer and SMB-focused neobanks held a significant share
• Web 3.0 and crypto-based start-ups saw explosive growth raising up to $500M+ in 2021

A number of new investors have become large players in the Indian venture market. Name like KKR, Warburg Pincus, Abu Dhabi Developmental Holding Company, Qatar Investment Authority have been added to the ones who are already here.

For more, read the report at https://www.bain.com/insights/india-venture-capital-report-2022/