Despite pandemic, India saw $10-bn VC deals in ’20

India witnessed continued inflow of venture capital (VC) money, with deal value reaching $10 billion in 2020, $1 billion less than in 2019, Bain & Company’s India Venture Capital Report 2021 said.

Despite the pandemic, India maintained its position among the top five start-up ecosystems globally, with 7,000 new start-ups founded in 2020 and the emergence of 12 new unicorns to take the country’s unicorn tribe to 37.

The report, prepared in partnership with Indian Private Equity & Venture Capital Association (IVCA), has highlighted 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% of all VC investments by value, with consumer tech attracting the maximum funding, the report said.

“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 authors of the report.

“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,” he said.

The deal volume grew by 7%, with approximately 810 VC deals against 755 seen in 2019, the year which attracted VC investments of $11 billion. “Growth in deal volume signalled strong fundamentals for India’s start-up ecosystem with new business models keeping pace with the challenges seen in 2020,” the report said.

In terms of key sectors, consumer tech, SaaS, and fintech continued to lead the way, accounting for 75% of VC investments in 2020, and 14 of 22 deals which were more than $100 million in size. Sub-sectors including edtech, foodtech, gaming and media and entertainment in consumer tech; verticalised solutions within SaaS; and payments within fintech recorded increase in investments, accelerated by the pandemic.

While consumer tech investments grew by 25% over 2019, there was a significant surge in the usage of edtech platforms, as well as growth in the average deal size in foodtech as compared to 2019, with large investments leading to the surge seen in gaming, the report said.