As the virus began to spread across India in late March of last year, investors began to be concerned about the impact a potential pandemic may have on their portfolio companies. They corresponded and, on April 1, sent a combined open letter to the local startup scene, encouraging companies to “prepare for the worst.”
In the months that followed, the virus swept across the South Asian economy, halting financial activities among other things. Startups began cutting costs as they scrambled to navigate through the unexpected occurrence. Some did not make it, while others bought during fire sales. Many business people and investors also come forward to help the country combat the pandemic.
Investors predicted the impact of the virus on the country, and by extension, on the companies striving to fuel the economy. However, few anticipated what was going to unfold in only a few quarters. Hundreds of businesses, many of which operate in the edtech and fintech sectors, have begun to report rapid growth. “We started seeing three and five years of growth in a year,” said Ashish Dave, CEO of Mirae Asset Venture’s India operation.
While many investors remained wary, including several tier 1 funds that are normally active in India, a group of investors led by Tiger Global, Falcon Edge Capital, and SoftBank went into high gear. In a conference earlier this year, Navroz Udwadia of Alpha Wave Global (previously known as Falcon Edge Capital) noted that his company prefers to go aggressive when most other funds are concerned about market circumstances.
In February of this year, Tiger Global invested in Infra. Market, boosting the business-to-business e-commerce platform’s valuation from $200 million to over $1 billion in only two months. Tiger Global stated in a February letter to investors that the opportunity it sees in sectors including consumer, enterprise, and financial technology in the United States, China, and India is “extremely big compared to the amount of money we manage and developing at a rate that is frequently hard to grasp.”
Investors are increasingly looking for growth areas such as new regions as their next major bets of the powder in the market. It also helped that Beijing imposed a slew of restrictions on its own companies, making it harder for outside capital to come into the country. Another factor in India’s advantage was the year’s record number of initial public offerings (IPOs). Zomato, a food delivery service, made a strong first impression. Nykaa, a fashion retailer, and PolicyBazaar, an online insurer, both achieved good stock market debuts. Paytm filed for the country’s largest IPO, yet the public market is still undervaluing the company.
According to Dave, taking Indian businesses public solved the issue of exit that many investors have experienced over the years. In April, as the virus was resuming its spread in India, investors’ enthusiasm for the nation was on full show.
In April, eight Indian businesses reached the unicorn club social commerce Meesho, fintech CRED, investment platform Groww, business-to-business messaging network Gupshup, and payments firm Chargebee. Tiger created five unicorns. The influx of wealth has caused a talent shortage in the industry. To attract and keep staff, startups began to offer attractive stock options and pay increases.
According to statistics from insight platform Tracxn, which has also filed for an IPO, cash pouring to private Indian companies increased by about fourfold to $39 billion last year, nearly tripling from the previous high of $14.6 billion in 2019. India already boasts 81 unicorns, with 44 of them joining this year. This year, a number of unicorns and other fast-growing firms secured numerous rounds of funding and saw their valuations skyrocket. In a recent round led by Insight Partners and Tiger Global, fintech Slice, which gives millions of Indians access to credit card services and helps them establish credit ratings, more than doubled its worth.
