India witnessed a steady rise in the emergence of unicorns in 2019, across segments like logistics, grocery delivery, B2B, and mobility. The nine unicorns born this year include Delhivery, BigBasket, Ola Electric, Druva, Icertis, Dream11, CitiusTech, Lenskart, and Rivigo.
But will this trend continue into 2020? Will the valuations grow? And will startups continue to raise more funding?
Sanjay Nath, Managing Director, Blume Ventures says, (If you look) at the numbers, everyone is going to be cautiously bullish this year.
And despite the global economic slowdown, capital flow into venture and private equity will continue as it runs in a seven to 10-year period. But Alok Goyal, Partner, Stellaris Ventures, cautions that there might be some distinction between early and late stage startups.
The first year of the new decade is likely to put a stronger focus on India versus global, while SaaS and core technology companies that target markets outside India continue to scale.
Sanjay believes B2B SaaS segment will continue to grow as these startups have cracked the capital-efficient business model and also have a global reach.
This makes it important for startups to put defensible business models and plans in place. An investor might bet on a company based on the sector, but the business model needs to be completely in tune and the founder must specify how the funds will be deployed, investors say.
Naganand Doraswamy, Managing Director, Ideaspring Capital, believes that while SaaS and B2B models are in focus, later-stage funding is still going to be slower. You may need both on-premise and SaaS models, but you cant get away without a SaaS strategy, he says.
Alok agrees that later-stage funding will see a slowdown.
The key factors investors are betting on are growth in mobile internet users, explosion of data consumption, pervasive 4G coverage, and the expected rise in disposable income, driven by increasing GDP per capita.
India has over a billion consumers with unique problems to be solved in every sector. While funds like Accel have already closed their funds, deployment is more likely during earlier stages. This may also be the WeWork effect, with the industry feeling the need for course correction.
Speaking of how 2019 fared, Tarun Davda, Partner and Managing Director, Matrix Partners, says, 2019 has been a record year for the Indian VC ecosystem, and a very active year for us at Matrix with over 20 new investments in the year.
Tarun believes three key trends stood out in 2019:
Sanjay Nath of Blume Ventures adds that 2019 saw the comeback of some large hedge funds that had been dormant in the market, especially in SaaS and Fintech.
Most investors agree that this is an incremental theme every year. It was more apparent in 2018 and 2019, which saw several second-time entrepreneurs.
Alok Goyal of Stellaris Ventures says there has been a strong stratification of the venture ecosystem as well.
Sameer Brij Verma, Managing Director, Nexus Ventures, says 2019 was not just stellar in terms of the investments made, but also because there was a vast increase in the quality of entrepreneurs.
He adds that the past two years have been interesting for Indian startups.
Alok agrees, adding that the year saw a lot of second-time entrepreneurs who came with experience in building for scale and helped grow younger startups.
What stood out in 2019 for Sameer of Nexus Ventures? Education, financial services, digitisation of SMEs and the B2B segment.
Sameer adds that the SME segment will continue to grow in the New Year.
Tarun, of Matrix Partners says 2019 saw the emergence of DINVIB (digitally native vertically integrated brands) consumer brands, social commerce, and fintech (neobanks) as strong sectors.
The year 2019 saw Tiger Global investing in NinjaCart and others like DeHaat raising funding. And 2020 is likely to put the spotlight on agritech and impact-driven startups.
Deepak Menon, Chief Programme Officer, EMEA at Village Capital, agrees.
He explains that startups are trying to solve hard problems on ground. Citing an example, Deepak says that a lot of people in the financial inclusion space that they work with have a professional background in financial services, banking, or insurance. They have dealt with clients, seen challenges, and are keen to solve them.
They're trying to build business models to address some of these problems. The shift that we are increasingly seeing involves more people looking at business, getting these things right, and building non-profit models around impact, Deepak says.
Avnish Bajaj, Founder and Managing Director, Matrix India, inconversation with Rajinder Balaraman, Director, Matrix India, in a recent podcast said,
All in all, 2020 is going to be a cautiously bullish year.
(Edited by Teja Lele Desai)
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