Late stage technology deals at an all time high in India: IVCA-EY report

The average ticket size of late stage technology deals is at an all-time high so far in 2021 compared to the last two years, with a total of 500 deals attracting venture capital funding to the tune of $17.2 billion in the first half of 2021 compared to a total of $11.1 billion in 2020, a new report has found.

The number of early stage deals saw a significant dip of almost half compared to 2019, the "State of Indian Markets: Investment Environment (Startup) Report" by Indian Private Equity and Venture Capital Association (IVCA) and EY says.

The study found 245 early stage deals so far in 2021, compared to 498 deals in the same time in 2019.

It further said there have been many deals above $20 million this year with a surge in the velocity of funding into startups by VCs.

Karthik Reddy, vice chairman of IVCA, and managing Partner of Blume Ventures, said, “2021 has unfolded into one of the most unexpected and aggressive phases of consumer and business adoption of digital, spurring the urgency amongst entrepreneurs, and financial and strategic investors to rapidly double down on their digital forays. It promises to be an unprecedented decade of growth for digital and tech businesses in India."

Among overall sector-wise trends and deals, fintech (financial technology) topped the charts with 61 deals followed by edtech (education technology) with 42 deals.

India ranked third in terms of a total number of unicorns, or businesses valued above $1 billion, in 2020 and has emerged as the new home of unicorns, with 21 new ones added in the first half of 2021.

Simultaneously, the potential pipeline expanded by 1.5 time, with nearly 8 per cent of global unicorns having a technology center in India. Investments have rebounded strongly with startup investments in the first half of 2021 surpassing total investments made in 2020.

More than 135 corporations are actively participating in investing, acquiring or partnering with start-ups. Currently, investments and mergers and acquisitions (M&A) recovery are in line with global trends, the report said.

“2021 has so far been a landmark year on multiple fronts – fund inflows, a groundswell shift to online services, IPO/exits becoming a reality, and increase in the M&A for scale and skill. While the investment activity has accelerated, there is a need to have a metered approach to build long-term sustainable businesses and shareholder value,” said Ankur Pahwa, partner, E-commerce and Consumer Internet leader – EY.

Tier-2 cities are leading the way, not only in adoption but also in startups, which shows a  gradual shift from addressing urban challenges.

Due to the Covid-19 pandemic, 2020 has provided tailwinds to digital adoption. The digital maturity of the Indian enterprise has doubled, while Internet penetration has expanded to over 750 million subscribers.

Uncertainty and rapid experimentations have shifted the founder mindset and a new playbook is emerging for the post-Covid world. Collaboration, employee experience, frugality, and global expansion are key to founders today.