India saw 12 new unicorns being created in 2020, the highest ever addition in a single year, and is on track to have a 50-plus strong 'Unicorn club' in 2021, a Nasscom-Zinnov report said.
Unicorns are companies having valuation of more than USD 1 billion.
The report titled 'Indian Tech Start-up Ecosystem On the March to Trillion Dollar Digital Economy' said the Indian tech start-up base is witnessing a steady growth of 8-10 per cent year-on-year, and over 1,600 tech start-ups were added in 2020.
Although cautiously optimistic, the report said 2021 promises a return to normalcy for the Indian tech start-up ecosystem and deep-tech and new start-up hubs will continue to grow at 40-45 per cent CAGR, it said.
India is on track to have a 50-plus strong 'Unicorn club' (companies with over USD 1 billion in valuation) in 2021 (from 38 in 2020), and M&A deals and IPO pipeline are also expected to accelerate in 2021, it added.
The report said over 2,100 start-ups are leveraging deep-tech, up from over 1,600 in 2019, and 20 per cent of the deep-tech start-ups are based outside established start-up hubs.
Fintech, health-tech, edtech, agritech and enterprise tech segments are witnessing rapid digital adoption.
"COVID-19 has accelerated digital adoption and the shift to online in the country. This has created new opportunities for tech start-ups that are capitalising on this opportunity with rapid digital acceleration and a shift to SaaS-based solutions," a statement said.
Deep-tech is also getting deep-rooted into start-ups' DNA with 19 per cent of the tech start-ups leveraging deep-tech solutions to build product competencies for market expansion, it added.
This has led to a significant momentum in the deep-tech space with increased interest from Venture Capital firms (VCs) and funding agencies to invest in deep-tech start-ups. About 14 per cent of the total investments in 2020 were in deep-tech start-ups, up from 11 per cent in 2019.
Further, 87 per cent of all deep-tech investments were in artificial intelligence/machine learning start-ups in 2020. Sectors with COVID-19 tailwinds such as edtech, BFSI, agritech and gaming are witnessing a steady increase in first time funding, up from 29 per cent in 2019 to 42 per cent in 2020, garnering a 14 per cent growth in absolute numbers, the report said.
"The Indian tech start-up ecosystem's performance in 2020 has demonstrated the resilience and can-do spirit of the Indian entrepreneur. The continued innovation, right decision making and strong investor commitment have positioned the Indian start-up ecosystem as a key contributor in accelerating India's digital economic growth," Nasscom President Debjani Ghosh said.
She added that with the continued addition of new start-ups, booming unicorns and increased adoption of deep-tech, the ecosystem shows an even more promising future.
"Depending on headwinds, 2021 promises to be a positive year for Indian tech start-ups marching steadily towards USD 1 trillion digital economy goal," she said.
Pari Natarajan, CEO of Zinnov, said the year 2020 saw start-ups increasingly leveraging and piggybacking on the foundational infrastructure that the government has in place the India Stack, UPI infrastructure, GST norms, FASTag, etc.
"These pillars reached an inflection point in the wake of COVID-19, with start-ups not only innovating on top of these layers, but bringing in the unaddressed and underserved tier-2/3 cities into the larger digital economic inclusion mix. In the face of adversity, start-ups have been able to create a flywheel of sustained innovation that will be instrumental in helping the Indian start-up ecosystem achieve escape velocity," Natarajan said.
Natarajan added that 2021 will see entrepreneurs engaging more with not just their peers but also with the government, corporates, and the manufacturing ecosystem, will catapult India's dreams of becoming a 5 trillion-dollar economy.
The report noted that certain proactive measures are required to ensure the continued momentum and growth.
These include government investment in building infrastructure and strengthening policies; ecosystem collaboration for market access for early stage start-ups; acceleration of corporate participation; and increasing seed-stage investments for tech start-ups that is currently less than 10 per cent of the total investment received each year.
The report also suggested taking steps to increase the share of domestic capital and expand the base of experienced talent in the country.
Nasscom defines tech start-ups ecosystem as active technology product or platform companies incepted in the last 5 years in 2015 or later.
(Only the headline and picture of this report may have been reworked by the Business Standard staff; the rest of the content is auto-generated from a syndicated feed.)