Indian tech startups raise a record $74 bn from PE/VC firms in 2021: Report

'E-commerce, consumer platforms, and IT services sectors were favorites among investors, recording 56% of total deal value in 2021,' says 'India Investments Pulse' report by Praxis Global Alliance

Indian tech startups raised a record amount of capital from private equity and venture capital firms in 2021. Investors pumped in $74 billion worth of investments in the previous calendar year across 1,123 deals, according to the India Investments Pulse report by Praxis Global Alliance, a global management consulting and advisory services firm based in India.

“Ecommerce, Consumer platforms, and IT services sectors were favourites among investors, recording 56 percent of total deal value in 2021”, said the report. 41 companies were added to the unicorn club in 2021, marking a record 3x increase over previous years.

The first-of-its-kind research report is supported by rich insights from around 100 VCs, PEs, LPs, and advisors on the evolution of the VC/PE ecosystem, changes across deal-making, fundraising, exits, and their overall outlook for 2022. 

The report also draws parallels between India and other countries like the USA, China, UK, Germany, Singapore and France, to provide an International VC and PE deal flow overview.

Madhur Singhal, managing partner and CEO of Praxis Global Alliance, said that 2021 has been a record year for tech and internet investments with a $40 billion deal value. “While this sector has grown rapidly, other sectors like IT services, healthcare, and manufacturing are doing well too,” said Singhal. “Investors will remain bullish over the India opportunity in 2022 as Indian tech startups will continue to attract capital from both private and public markets. We also believe that SaaS, Consumer, B2B tech, and Healthcare to become darling of investors this and the next few years driving the growth of the overall ecosystem.”

This report is intended to provide industry stakeholders (VC/PE funds, business leaders, entrepreneurs, and policymakers) an overall perspective on Indian private market investments in 2021. In this report, Praxis touched upon the evolution of the Indian macro-economic outlook. The firm also conducted an in-depth analysis of the various trends in Indian VC and PE deal-making, including sectoral, deal size, and stage distribution.

The top 10 takeaways for 2021 from our analysis are as follows: 

1. India’s growth story continues to be robust  

Real GDP is estimated to grow by 9 percent in FY22 vs. global growth of 4.4 percent in 2021 (World Bank estimates) 

2. The fastest-growing startup ecosystem in the world after the USA   

VC/PE investments in India grew 80 percent by deal value in 2021; 41 companies achieved unicorn status 

3. The booming stock market drew both retail as well as domestic and global institutional investors  

Record fundraising through IPOs at around US$ 18B (3x compared to 2020 figures)  

4. Highest level of deal activity ever: Around US$ 78B invested across 1,193 deals in 2021 

33 percent increase in average deal size driven by large deals (165 US$ 100M+ deals vs. 85 in 2020) 

5. Breakout year for Tech and internet investments with around US$ 40B invested across 816 deals 

Tech and internet investments accounted for 53 percent of total deal value in 2021; Tech deals were 73 percent of total deals in 2021

6. Ecommerce and Consumer platforms were the top-funded sectors  

Record level of investments of US$ 16B (4x 2020, five US$ 500M+ deals) and US$ 13B (3x 2020, four US$ 500M+ deals), respectively 

7. Record year for buyouts with deal value reaching US$ 18B in 2021 

IT services recorded buyouts worth US$ 10B followed by SaaS with US$ 2B 

8. Bumper harvest for LPs: US$ 41B returned across 275 exits (around 65 percent higher than the previous high of US$ 25B in 2018)

Large strategic deals along with record levels of secondary sales and IPOs 

9. Significant growth in new investors in India underlining belief in India growth story

158 new domestic and international investors in India in 2021 (95 percent increase vs. 2020)

10. Outlook for VC/PE activity in 2022 is mixed

Half the Investors are bullish, whereas the other half feel it will be the same or deteriorate