The unprecedented rush of risk capital has led to more than 240 seed rounds with total disclosed investments of $284 million so far in 2021, according to data from specialist staffing firm Xpheno, shared exclusively with ET.
The total value of deals this year has already surpassed those for the whole of 2020 and 2019 when startups raised total seed capital of $181 million and $186 million, respectively, data showed.
With four months still to go, the deal count is also expected to overtake 2020 count of 302 and 2019 count of 257 as India looks well-poised to become the startup hub of the world, top venture capital fund managers and industry experts said.
They attribute the development to a combination of factors including an increasing number of quality entrepreneurs, a tidal flow of global capital, anti-China sentiments, widespread digital adoption across sectors, and a buoyant primary market for well-established startups.
“There has been a rapid total addressable market (TAM) expansion post pandemic for almost every market because more people are using digital and consumption of online services has increased exponentially,” said Pranav Pai, managing partner at venture capital fund 3one4 Capital.
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Pai, who is seeing over 400 companies every month for potential funding, said his company has done the highest number of deals in the last 10 months than ever before.
Widespread digitisation across sectors and cultural acceptance of startups by Indian consumers is one of the major factors that led to the emergence of a record number of new-age companies to cater to different needs of consumers ranging from ecommerce, healthcare, and financial services to online education and SaaS (software-as-a-service) ventures, experts said.
“The biggest upside of this surge of capital is the willingness (of angel investors) to move beyond the obvious, and back niche and unaddressed categories,” said Swathi Kulkarni, co-founder of Elda Health, a digital wellness platform for women, that raised seed funding of $1.5 million from Avaana Capital, Orios Ventures and Ananth Narayanan family office in August.
As per data compiled by Xpheno, tech ventures have taken up 63% of the seed capital as on date this year.
The average seed size in 2021 so far stands at $1.2 million, double of the average in 2020. The growth in ticket size shows the strong investor confidence in the ideas they are betting on.
Also, both the quality and the number of people that are starting up have improved.
“There are a record number of repeat founders or CXO talent leaving large companies and starting up,” said Pai of 3one4 Capital. “That means at the seed stage the time to take a decision to fund a company is cut down, leading to more deals getting done.”
Another factor is that India has become a more favourable destination for global capital. “The concern about the political environment in China has turned into India’s opportunity with more money flowing into India, making more deals possible,” Pai said.
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Take the case of early stage agritech startup Faarms, which raised $2 million in seed round led by global investors Koh Boon Hwee and Dr Cornelius Boersch with the participation of angel investors.
“Global investors are watching early-stage companies with a lot of interest,” said Taranbir Singh, cofounder and CEO of Faarms. “Scalable opportunities backed by a strong pedigree of professional teams can be a winning preposition.”
Angel investors who invested 10 years ago are seeing handsome returns and expanding their investments.
“Startups are seeing exits both to strategic investors in India and overseas as well as through public market listings,” said Anup Jain, managing partner of Orios Venture Partners.
Akarsh Shrivastava, vice president at venture capital firm Elevation Capital (formerly SAIF Partners), said, “The previous generation of tech companies has created an experienced pool of operators… The success stories of such category-defining companies have only encouraged them (angel investors) further.”
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