All Is Well… Almost

2021 has turned out to be the most spectacular year for the Indian startup ecosystem, helping it attract billions of dollars in investment and churning out a record 42 unicorns in the process. Not to forget the staggering number of IPOs that we saw this year. Experts say this is just the beginning of a bigger party ahead

2021: 42 Unicorns. $32.8 billion in funds. Euphoria.

It was a defining moment for India when inMobi became the country’s first unicorn — a company with $1 billion valuation — in 2011. A decade later, India is home to 79 unicorns with a valuation of close to $260.5 billion, 42 of which were born in 2021 alone. Undeniably, 2021 has emerged as the golden year for the Indian startup ecosystem with a slew of investments coming from across the board and successful IPO launches of companies like Paytm — which went on to become the country’s largest IPO ever at an issue size of Rs 18,300 crore — Zomato, Policybazaar, PharmEasy, Nazara Technologies and Nykaa. But the question that everyone is asking is — why this fund rush this year? And, more importantly, is it sustainable?

Rajan Anandan, MD, Sequoia India, throws some light: “It’s true that 2021 has seen unprecedented levels of funding. The large number of unicorns and, more importantly, a series of successful IPOs have led to increased investor interest from around the world.” He also credits India’s deep talent pool, rapid adoption of technology and Covid-19 for generating tailwinds behind more and more Indian businesses that are making a mark on the global economy.

For the country’s 50,000-odd startups, the investment boom is a huge encouragement. While the reasons behind the boom are far too many, the $3-trillion booster dose by the US government to strengthen its economy saw a ripple effect in India as well. Investment firms like Tiger Global and Sequoia Capital started showing a renewed interest in Indian startups. Tiger Global has invested in at least six of this year’s unicorns, including healthtech startup Innovaccer, B2B construction platform Infra. Market, fintech startup Groww, messaging tech startup Gupshup, Indian language social media platform ShareChat and software-as-a-service (SaaS) startup Chargebee.

However, the influx of funds isn’t just the result of quantitative easing (QE). A rise in high-quality startups, increased technological efficiency, buoyant public markets and rising local investors have all contributed to the positive sentiment. And, that is precisely why the boom is also sustainable, believes Sid Talwar, co-founder & partner, Lightbox. “There are all kinds of pools of capital coming in from around the world. And, it’s not just because of any kind of QE. There are a multitude of factors responsible for it. First, there is a lot of money that may have gone to China but didn’t. Second, Indian technology stocks have now started going public and American funds have been using that entry point to understand India better. And third, our ability to get noticed globally has increased,” he says. Lightbox, too, has made quite a few investments this year, taking their total number of investments to 43. Their most recent one was on November 16, 2021 when WayCool Foods raised Rs 853 million.

Big Boys’ Bets

Even top Indian corporates such as the Tatas, the Mahindras and Reliance Industries have been backing startups and creating unicorns. While Reliance Industries has invested $3.41 billion in 21 Indian startups, the Tatas have invested $380 million in various startups like OLA, OLA Electric, Paytm, Snapdeal, Curefit, Tork Motors, iKure, Urban Ladder, Lenskart, FirstCry, CarDekho, Dogspot, BlueStone, ShareChat, Moglix, among others with a majority stake in prominent ventures like 1mg and BigBasket.

Mayank Kumar, co-founder & MD, upGrad, one of the unicorns this year, says that the current growth momentum can be sustained only by staying the course and innovating with technology. “With startups turning into an asset class, inflow of investments and capital has increased significantly from global investors. With the right tailwinds and the inclination of Indian consumers to move to digital as a result of the pandemic, startups will continue to thrive,” he says.

But Sequoia India’s Anandan cautions: “While it is hard to predict when we have the cycle turn, what we know for sure is that this level of momentum will not continue forever. However, given the fundamental strength of the ecosystem and trends across segments, fundraising will continue across stages — even if it’s less intense compared to this year.”

Good Times Ahead?

Indications are already pointing towards a positive year ahead — at least as far as startups are concerned. According to a survey by TurningIdeas Ventures that covered more than 100 startups, over 42% of the startups are looking to go global in 2022. upGrad is aggressively expanding its international operations across the US, Europe, the Middle East and Africa (EMEA) and the Asia-Pacific (APAC) regions. Add to that the IPO mania that has gripped Indian markets and the result can only be a blockbuster.

In 2021, 65 companies got listed at the bourses while six of them filed their DRHP compared to the 17 companies that went public the year before. Among the companies that got listed this year, nine were new-age companies that raised more than $6 billion from the capital markets. Not to forget the stellar debut of Chennai-born Freshworks on Nasdaq at a valuation of $13 billion — the first Indian SaaS company to achieve that feat. Freshworks IPO not only strengthened investor trust in Indian startups but also is a huge encouragement for startups that wish to go global. 2022, too, is likely to deliver some sweet surprises for Indian startups with inMobi planning a US IPO and Ola, BYJU’s, Delhivery, Ixigo and Droom looking at NSE listing. Clearly, India’s startup space won’t cease to keep buzzing.

Apart from investors, even startup founders are bullish. “I do not know about mid term but in the short term and the long term, India will continue to attract large amounts of funds flowing into the ecosystem of startups, and digital and new-age economy,” says a confident Sandeep Aggarwal, CEO and founder, Droom, who is also an angel investor. NoBroker’s Akhil Gupta agrees. “The next decade belongs to India because there is no better place to invest than in India. Covid has accelerated the digital journey for many sectors which has attracted a lot of money due to come in the next few years,” says the company’s co-founder and Chief Technology Officer.

Confident investors, better business models, favourable demography and futuristic policies are sure to further consolidate India’s position in the global startup arena. Ankur Pahwa, EY’s India E-commerce and Consumer Internet Leader, supports the thought. “The diversification of capital pools, a maturing startup ecosystem, exit momentum both through listings and M&A and the current geopolitical conditions will continue to see India attract more capital. As emerging sectors like manufacturing and industrial supply chain get more digitised and go global along with SaaS companies, the capital influx should continue to be high,” he says.


The US Federal Reserve has announced that it would begin tapering its massive asset purchase programme which means that it will gradually withdraw the monetary stimulus it had introduced to help the US economy survive the impact of Covid-19. It had been buying $120 billion worth of treasury bonds and securities every month since March 2020. This totals to over $4 trillion and is also known as QE. The Fed will now reduce the purchase of treasury and securities. Back in 2013, when the Fed had opted for tapering, it had made global markets jittery and led to a rush of funds out of emerging economies. Some experts have expressed concerns over a similar phenomenon hitting countries like India. But whether India, which seems to be in a better position today with strong fundamentals, sails through the taper aftermath or sinks, will have to be seen.