Indian startups: Startup Inc starts the year with a bang and pockets $3.5 billion in January

Mumbai: Indian startups landed record investments of up to $3.5 billion in 130 deals through January, marking a ten-year high amid slowing global markets, signaling continued investor interest in the ecosystem of the country’s booming startups.

The strong pace, which has seen more than four transactions per day and more than $115 million in daily inflows in disclosed transaction value – according to data collated exclusively for ET by specialist recruiting firm Xpheno – comes at a time when the private equity and venture capital industry was bracing for a slower 2022 based on global and national indices.

The total value of disclosed deals in January is six times higher than the same month last year, which saw 75 deals with a disclosed value of $600 million, while in January 2020, Indian startups closed 65 deals with a disclosed value of $1 billion, according to the data.

“Starting the year with record investments is a boost for companies that aspire to a strong year-end. With year-to-date investment (in this fiscal year) already at the $40 billion mark and two more months, we are on track to witness the strongest investment year yet. said Kamal Karanth, co-founder of Xpheno.

The strong performance comes on the heels of a mega year for venture capital investments, with Indian startups fetching $34.7 billion from 1,070 deals in calendar year 2021, an increase of nearly 200 % compared to 2020, when $11.4 billion was invested across 795 deals.

Last year, the industry also saw an increase in mega deals with 97 funding rounds amounting to over $24 billion.

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Preparing for a beating

“It’s a demonstration of investors’ continued long-term belief in Indian tech history,” said Pranav Pai, managing partner at 3one4 Capital.

Pai opines that despite “a significant correction in global markets lately, liquidity remains available (with) a high likelihood of being allocated to emerging economies like India and technology-focused companies.”

Shares of newly listed tech-focused companies fell 20-30% in the two weeks to Jan. 28, compared to an overall decline of 5-7% in the Nifty.

Shares of online food delivery and restaurant discovery platform Zomato fell below its listing level after falling sharply. Shares of One97 Communications – the parent company of Paytm, PB Infotech – the parent company of Policybazaar – and CarTrade Tech fell significantly in January from their respective IPO prices, according to ET analysis.

Venture capitalists bracing for an industry-wide correction this year believe Indian startups are still well positioned to weather downturns and are more resilient.

Highlighting a slew of nearly two dozen startups filing initial public offerings in 2022-23, Pai said that “even though there is a correction this year, Indian startups are better prepared and more resilient to face a slow-down”.

Although much of January’s inflows can be attributed to the funding frenzy that kicked off in 2021, investors are confident that “India continues to be the market that attracts investment. Google in Airtel is a reflection of that,” Anup said. Jain, Managing Partner, Orios Venture Partners. On Friday, the search giant announced a $1 billion investment in India’s second-largest telecom operator.

This month, seed investments accounted for 34 deals amid a continued rush of venture capital to support start-ups, Xpheno analysis found.

The technology and non-technology mix stood at 54% compared to 46% compared to the total mix of 70% technology and 30% non-technology in 2020.

Industry experts such as Ankur Pahwa, Partner and National Leader – E-Commerce and Consumer Internet, EY India, opine that investor confidence in startups is likely to continue as the depth, adaptability and acceptance of the ecosystem are now well accepted.

“Some sectors may experience a slowdown or valuation corrections, but the momentum for most will continue,” he added.

The investment boom is also expected to increase the need for labor as it stimulates job creation and movement of talent as more capital is deployed to build capacity and drive growth.

“What was already a year of hyperactive hiring is now poised to shift gears and see an amplification of hiring intent and hiring action,” said Xpheno’s Karanth.

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