A recent report released by management consulting firm, Bain & Company has revealed that 2019 was a milestone year for India's venture capital industry with $10 billion invested into startups. This is a 55% jump from 2018 and is the highest ever in the Indian startup ecosystem.
This was led by a 30% increase in deal volume and a 20% rise in average deal size over the year, according to the India Venture Capital Report 2020, which was conducted in conjunction with Indian Private Equity & Venture Capital Association (IVCA).
While capital deployment was at an all-time high, $7 billion of dry powder - or investable capital - was available at the end of 2019. This could indicate continued investment activity in 2020, though due to the COVID-19 outbreak spending is at a low.
“Despite the global economic climate, India’s start-up and VC ecosystems continue to thrive as investors take a long-term view based on the country’s growth potential. We go into 2020 with record-high levels of dry powder, counter-balanced with caution and an underlying optimism in the long-term potential for the ecosystem,” said Arpan Sheth, a partner at Bain & Company and a co-author of the report.
The report also indicated that almost 80% of venture capital investments were made across four sectors: consumer tech, SaaS, fintech and B2B tech.
Consumer tech attracted about 35% of the total investments, while verticalized ecommerce collected the highest share of investor capital. Paytm, the Indian e-commerce payment system and financial technology giant accumulated up to $1 billion in venture capital, private equity and strategic capital in November. Other companies like Udaan, Delhivery, PharmEasy, Ola Electric, Grofers, and Blackbuck collected anywhere between $150 and $600 million in 2019.
India’s startup economy ranks in the world’s top five ecosystems. Between 2012 and 2019, the number of startups in India increased by 17% over seven years, while funded startups increased by 19% over the same period. Seed and early-stage deals, which includes Series-A and Series-B rounds rose by about 71% and 31% to $1.2 million and $8.2 million. Notably, of the 800,000 startups in India only 8% are funded which shows room for investment and growth.