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ROMA Priya

The author is Founder of Burgeon Law, a new-age boutique law firm that provides a one-stop legal shop to emerging companies, incubators, accelerators, angel investors, family offices and venture capital/ private equity funds.

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Five Upcoming Trends In The Startup Investment Sector

Investments in these three sectors have been skyrocketing since last year, with the investor community backing multiple innovative, high-growth startups.

Photo Credit : Pic Courtesy: Pixabay,

2020 has undoubtedly been a period of radical shift for both the Indian startup and investor ecosystems. While investors, particularly those who focused on early-stage investing, faced immense challenges at the outset of the global pandemic where they were forced to recalibrate their operations and rethink their investments, the investor ecosystem has made a swift recovery.

Even as the world adjusts to the new normal, global and domestic investors have once again begun investing in the Indian startup ecosystem. Just in the first half of 2021, Indian startup funding surpassed the amount raised during the whole of 2020 with 543 deals from approximately 1020 investors in the ecosystem. This year has also seen several startups join the Unicorn league.

By the end of this year, the Indian startup ecosystem is expected to touch record numbers in terms of deals, the amount raised, the number of startups entering the Unicorn club. As we near the end of the year, with investor sentiments continuing to remain positive, it’s time to analyze some of the upcoming trends in the startup investment sector.

Sector-wise increase in investments

The overall startup ecosystem has progressed immensely, and Fintech and Ed-tech have indisputably displayed consistent signs of sustained yet rapid growth. India’s Fintech and Ed-tech sectors are some of the largest in the world. With the pandemic further accelerating the adoption of digital payments and online learning, an increasing number of startups have emerged in these spaces alongside existing startups achieving remarkable growth. As for the Health-tech sector, the pandemic certainly underscored the need for robust and efficient healthcare infrastructure – one that would not crumble in the event of an unprecedented crisis such as the COVID-19 pandemic.

Investments in these three sectors have been skyrocketing since last year, with the investor community backing multiple innovative, high-growth startups. As 2021 nears the end, and we prepare to step into the following year, this surge in sector-wise investments is expected to prevail. In fact, other sectors such as OTT, Manufacturing, Mobility, and FMCG, too, are projected to witness increased backing from the investor community.

Foreign investments

Shortly after the geopolitical standoff between India and China, the Indian government, in April 2020, declared that any private investment into Indian companies by investors/entities from countries that share a geographical border with India would require prior approval from the government. Now, although the investments from Chinese investors have significantly decreased post this rule, as the global investor community recovered from the initial blow dealt by the pandemic, Indian startups have been seeing a growing number of foreign investments from both angel investors and VCs. This trend is likely to continue well into the foreseeable future as the world begins to see the immense potential that the country’s startup ecosystem displays.

Continued focus on non-metros

At the outset of the pandemic, with remote working being introduced country-wide, there was rampant reverse migration. And with increasing internet proliferation in tier-II and tier-III cities, entrepreneurship, too, was on the rise. However, even after the lockdowns, as the workforce demographics and consumer profiles have undergone a major transformation, investors have understood that there are budding, high potential startups in non-metros. With an increased focus from investors, the coming years will see several successful startups emerging from tier-II and tier-III cities and possibly even beyond them.

Disciplined fundraising

The COVID-19 pandemic has proven that startups will need to reorganize their operations and follow a more disciplined, streamlined approach. Additionally, the crisis, especially at the outset, made investors frugal about investing. Although investments are flowing into startups once again, both startup founders, as well as the investor community, are looking at a disciplined, organized approach to fundraising. Besides, investors are also seeking startups that are building innovative solutions to real-world problems and have a majorly digital or tech-centric way of working.

The rise of unicorns and going public

As investments flow in for the promising, high-growth startups, more and more of them are entering the Unicorn club. Just in the first six months of 2021, 15 startups became Unicorns, and there are several more on their way. Besides this, startups that have become unicorns are also beginning to go public and offering IPOs. This year, while startups such as Zomato have already released their IPOs, there are many more in line to join the IPO bandwagon, such as Paytm, Mobikwik, and Nykaa, amongst others.

In conclusion

While the investor community will continue to tread carefully, it will also ensure emerging, and innovative startups have sufficient backing that will enable them to scale further. This type of continued support will allow India’s startup ecosystem to progress further, paving the way for today’s startups to become the enterprises of tomorrow.

Disclaimer: The views expressed in the article above are those of the authors' and do not necessarily represent or reflect the views of this publishing house



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