COVID-19 has unleashed an unprecedented horror across India, be it the rising number of infections, crashing economies, unemployment or the overburdened healthcare system. Despite this, a marginal uptick can be found in the evolving startup sector of India. The pandemic has accelerated digitalisation, which helped most startups benefit and grow significantly. According to the Economic Survey 2020-21 by the Ministry of Finance, India currently has 41,317 startups recognised by the Department for Promotion of Industry and Internal Trade (DPIIT). More than 39,000 startups are reportedly providing 4,70,000 jobs currently, making India one of the world’s top 20 largest startup ecosystems.
The government has bought several measures to support startups in India, in recent years. Be it broadening the definition of startups, simplifying regulations or even Income Tax exemptions (319 eligible startups got an exception under 80-IAC of the Income Tax Act). The government has also allocated ₹10,000 crores of funds for startups by the Small Industries Development Bank of India, mainly to assist the entrepreneurial spirit of the country. On December 1, 2020, a total of ₹4509 crores were distributed among 384 startups through the “fund of funds” scheme. Another scheme, namely the Startup India Seed Fund Scheme (SISFS) offered ₹945 crores to provide financial assistance to the startups for developing proof of concept, prototype development, product trials, market entry and commercialisation. Currently, the government is opening the space sector for private firms. More than 40 startups are gearing up for space and satellite projects. Even the Startup India Initiative that started on January 16, 2016, focused on supporting entrepreneurs, setting up a startup ecosystem and transforming India into a country of job creators from job seekers. Initiatives such as the Startup India Yatra were conducted in tier 2 and tier 3 cities, with a main objective to find entrepreneurial talent. These have made a great impact on India’s startup ecosystem.
The latest report by Nasscom-PGA Labs suggests that Indian startup investments have gained $6.5 billion in the second quarter (April- June). This includes 160 funding deals, which is 2 percent more than the previous quarter (January-March). The major deal saver here is Swiggy, raising $800 million. This is followed by ShareChat at $502 million and Byju’s at $340 million. The number of unicorn startups also increased to 54 by the end of June 2021. 27 percent of the new unicorns added in the second quarter were in the fintech sector and 18 percent in the SaaS sector. The American investment firm, Tiger Global Management invested in 64 percent of the unicorns during the second quarter. B2B startups have raised $1.9 billion, which includes startups like Zeta, Razorpay and Axtria, while the B2C startups have raised an amount of $4.2 billion. The fast transition to digital has come with more investors confiding in good quality digital business.
The year 2021 underlines a huge benchmark with more Mergers and Acquisitions (M&A), with a record value of $3.8 billion. According to YourStory’s research, the M&A transactions since January 2021 till date include 119 deals, up from 86 in 2020. A strong M&A momentum tracked when Byju’s ed tech invested $2 billion to acquire seven companies this year. The history of acquiring competitors is setting a new trend in India’s Startup ecosystem. The growing ambitions of Indian startups allow them to take bold steps like acquiring old businesses. The digital investment platform, Groww acquired the mutual fund business of Indiabulls for ₹175 crores. The fintech startup BharatPe, with Centrum Financial Services, has taken over the financial institutes of Punjab and Maharashtra Co-operative Bank Ltd. (PMC Bank), with ₹1800 crores. The online pharmacy startup PharmEasy has acquired the diagnostic chain Thyrocare for ₹6,334 crores. For some startups, such as food tech deliveries and logistics aggregators, M&A becomes the last hope. Giant ecommerce ventures are also part of the list. Flipkart acquired a majority stake in Cleartrip, Amazon.com, Inc. acquired Perpule, and Byju’s acquired stakes of Akash Education for $1 billion. M&A has become the high capital flow of the Indian Startup ecosystem, especially for startups looking for leadership positions by taking risks and expanding reach. Even giant conglomerates such as the Tata group acquired Big Basket, 1MG and CureFit.
Considering the period of January-May 2021, startup investments have already touched $8.6 billion, that is 80 percent higher than investments in the first half of 2020 which were at $4.85 billion. According to YourStory’s data, the current investment has reached 81 percent of last year’s total investment, which was $9.94 billion. The first half of 2020 made $4.85 billion from 424 deals, whereas the number of deals in 2021 already crossed 441 by mid-June. A total of 14 new startups became unicorns, 11 of them between April-May 2021. This is also evident in the late stage investments of the first half of 2021, which stood at $6.29 billion. In comparison, the late stage investments of the first half in 2020 were $2.56 billion.
All statistics indicate a great future for the startup sector, which can create a promising job market and a stable economy for India.