Venture capital investments reached $10 billion in 2020

Despite the Covid-19 pandemic, India witnessed continued momentum in venture capital (VC) money flows with total deal value reaching $ 10 billion in 2020, the highest across all years barring 2019, according to Bain & Company’s India Venture Capital Report 2021.

India maintained its robust position among the top five startup ecosystems globally, with 7,000 new startups founded in 2020 along with the emergence of 12 new unicorns to take India’s unicorn tribe to 37.

The report, done in partnership with Indian Private Equity & Venture Capital Association (IVCA), highlights the dramatic impact of Covid-19 in accelerating digital trends, which was reflected in VC money flows and the emergence of new and digitally founded business models across sectors.

The top three sectors — consumer tech, SaaS, and fintech accounted for nearly 75 per cent of all VC investments by value, with consumer tech attracting the maximum funding.

“2020 was truly extraordinary as we saw Covid-19 have a significant impact on our economy and healthcare systems, while also accelerating digital adoption across sectors,” said Arpan Sheth, partner at Bain & Company and one of the report’s authors.

“This adoption led to a continuation of trends seen over previous years, including strong deal flow, focus on consumer tech and SaaS and continued growth in start-ups.”

The year 2020 was also noteworthy for the Indian VC industry with some moderation seen over the high growth observed in 2019. While the total deal value declined slightly to $ 10 billion in 2020 from $11.1 billion in 2019 due to smaller average deal size, deal volume grew by 7 per cent with approximately 810 VC deals versus 755 seen in 2019. Growth in deal volume, signaled strong fundamentals for India’s startup ecosystem with new business models keeping pace with the challenges seen in 2020.

Active VC funds in India, which have been on a steady growth trajectory over the last four years reached a total of about 520 in 2020. In parallel, fundraising saw significant activity with a record-breaking $3 billion raised by Indiafocused funds. In addition, India-focused dry powder, which has remained stable over the last four years, ended 2020 at $6 billion indicating strong investment activity going forward.

On the flip side, VC exits declined by about 70 per cent to $1.3 billion in 2020 from $4.4 billion in 2019 due to the adverse impact of the pandemic on businesses and VC portfolios not reaching maturity in 2020. One-third of the exit value came from edtech and about 20 per cent from foodtech, sectors that also saw a spike in end user adoption and funding activities during the pandemic.