Ecosystem

Startups 2022: Looking forward to funds ideas & FDI as startups emerge as an asset class

As 2022 looms up, the Indian startup ecosystem looks forward to ideas and funds, both local and foreign.

After the shock and awe of 2020, industry recuperation was the theme for many startups in 2021. While that did happen, the startup scene scintillated with new ideas and funds, especially the tech sector.

COVID has been significant in shaping the investment landscape in the last 1.5 years. We have seen investments flowing significantly in tech-driven startups, majorly healthtech, EdTech, eSports, FinTech, and SaaS.

A total of US$28.1 billion were invested in startups in the first three quarters of 2021, seeing a good increase from US$10 billion in 2020.

What can we expect from 2022?

Ankur Mittal, Co-Founder of Inflection Point Ventures (IPV), an angel investment platform, says VC in 2021 has been good as he predicts the outlook for 2022.

Ankur Mittal

We expect the same growth in the following year as investors have now gained a wider perspective with regards to the ways to deal with fluctuations caused due to COVID in the startup ecosystem

“We expect the same growth in the following year as investors have now gained a wider perspective with regards to the ways to deal with fluctuations caused due to COVID in the startup ecosystem,” he says.

“2022 will also bring more startups working in AI/ML and SaaS to blur the lines between the physical and the digital worlds even further,” he adds.

“Angel investing is also becoming widely popular, and with the democratisation of startup investing and IPO buzz, more investors are finding themselves interested in angel investing,” he says.

Started in 2018, IPV believes that ‘everyone can grow with startups’. IPV has close to 5,500 investors as members who are CXOs, HNIs and top professionals investing in startups as a serious asset class.

A few startups backed by IPV include ikure, a healthcare service provider, later invested by industrialist Ratan Tata. ikure was an ET start up 2021 nominees for Social Enterprise. Similarly, toch.ai recently received investment of US$11.75 million Series A funding.

In the Eye of the International Investor

Indian startups are seeing a rise in foreign investments.

Recently, Progress, a US listed IT company celebrating its 40^th anniversary, has been expanding its business in India and has new offices in Hyderabad and Bengaluru and is actively hiring DevOps engineers from India for global business.

California based CloudBlue, which set up shop in India for Vodafone Idea, is looking at partnerships with Indian SMBs.

International investors look at India as a budding startup ecosystem where young entrepreneurs are passionate about new ideas and are solving the issues relevant to the larger society. Being considered a good manufacturing base, India has abundant labour and technology driven minds

“International investors look at India as a budding startup ecosystem where young entrepreneurs are passionate about new ideas and are solving the issues relevant to the larger society. Being considered a good manufacturing base, India has abundant labour and technology driven minds,” Mittal explains.

“Additionally, a few sectors have been picked by the government, wherein they provide incentives for the international investor base. Some of them are solar equipment, chemicals, electronics, and medical devices,” he adds.

Startups as an Asset Class

Mittal says there is a definite trend of wealthy investors opting for startups as an asset class.

“Startup investing has developed as a key asset class in the last couple of years. Investors with dry money are witnessing the growth of the Indian startup ecosystem and are hence keen to explore this space,” he explains.

Investors with dry money are witnessing the growth of the Indian startup ecosystem and are hence keen to explore this space

“All the other asset classes, be it FDs, gold, or real estate, have started giving lesser returns than in the past. Startup investing, though a bit riskier than others, gives much higher returns,” he adds.

For new investors who are just starting to explore this space, IPV organises regular masterclasses to make them aware about startup investing and its importance as an emerging asset class.

2021 Achievements of Indian Startups

Business in the startup ecosystem has been good. According to the Deal Tracker Release and the report by Grant Thornton Bharat five new unicorns emerged and one of the largest Series A funding, CredAvenue, raised US$90 million in October alone.

M&A transactions stood at US$3.3 billion across 61 deals, where startups and IT sectors continued to drive M&A volumes with 24% and 8% respectively; aggregate value of US$391 million.

With the democratisation of startup investing and IPO buzz, more investors are finding themselves interested in angel investing

Sectors such as hospitality and leisure, pharma and healthcare, e-commerce, retail and consumer sectors accounted or 32% of the M&A deals.

uFaber, a profitable, bootstrapped Indian EdTech startup, unveiled an INR10 crore accelerator program for early stage EdTech startups. While a few days back, the Government of Telangana’s Telangana Blockchain District, CoinSwitch Kuber, and Lumos Labs launched the India Blockchain Accelerator aimed at empowering the thriving blockchain startup ecosystem in India.

Impactful IPOs

IPOs in 2021 have played a significant role in getting people interested in startup investing.

In December, IPOs witnessed record monthly figures, both in terms of issue volumes and issue size, with 10 issues worth US$4.8 billion. The startup sector occupied the larger share of volumes (70%) of PE.

Already some big IPOs are lined up, which includes startups like Ola and Byju’s

The IPOs of Nykaa and Zomato were two of the most impactful this year. Especially for Nykaa, the stock soared 89% to INR2,129 against the IPO price of INR1,125, an exceptional jump for a startup.

Talking about 2022, Mittal says, already some big IPOs are lined up, which includes startups like Ola and Byju’s.

Looking Forward to Funds & Ideas in 2022

The Indian startup ecosystem has been brimming with new ideas this year with society demanding more technology in their lives. Trends such as high FDI investments, angel investing in startups as an asset class, and higher number of IPOs marked the trends in the ecosystem.

Investment platforms like IPV look to continue the good vibe.

“While we have entrepreneurs from different parts of the country giving life to their ideas, angel investment firms like IPV have played a significant role in shaping these startups,” says Mittal.

“Having said that, IPV is a sector agnostic platform and has invested in startups belonging to different sectors in 2020 and 2021 and is looking forward to investing in an even wider range of startups in 2022,” he adds.

The Indian startup ecosystem looks forward to ideas and funds, both local and foreign in 2022.

Navanwita Bora Sachdev

Navanwita is the editor of The Tech Panda who also frequently publishes stories in news outlets such as The Indian Express, Entrepreneur India, and The Business Standard