If there’s one thing India’s startup ecosystem has learned in 2022, it’s that the sky-high valuations and big funding rounds of 2021 are a thing of the past, and possibly an anomaly. As it turns out, only 21 companies will become unicorns by 2022, less than half of the billion-dollar startups expected to reach valuations in 2021 (44).
While the inflated valuations and funding frenzy of 2021 may not be repeated in 2023, industry watchers say the Indian startup ecosystem is well positioned in the global economy.
While global markets continue to face headwinds from an uncertain geopolitical situation in Ukraine and a resurgence of Covid infections, the current situation is far better than what the world saw in 2008, said Anirudh A Damani, managing partner, ALSA Venture Fund.
Millions of jobs are being laid off every week in the United States. Today, banks are very strong and well capitalized, Damani said.
“Barring something absolutely catastrophic like the Russo-Ukraine war turning nuclear, I am well aware that 2023 will see record levels of money flowing into India,” he added.
Unfavorable market conditions in 2022 have caused many startups to shelve IPO and financing plans due to undervaluation. As a result, funding raised by Indian startups at seed, early and late stages will drop by 43% to $14.76 billion in 2022, according to Crunchbase, a U.S.-based research platform that tracks private companies.
However, industry watchers believe it is necessary to bring sanity to India’s booming new-age economy, which is expected to contribute 4-5 percent to its gross domestic product in the next two to three years.
“Sanity has returned to the market,” said Fireside Ventures principal Prayag Mohanty.
While experts predict a gradual improvement in money flows in 2023, they expect this to continue for some time.
“The financing situation is likely to remain tight in the short term, but it will eventually ease,” said Jatin Kanabar, partner at Deloitte India.
However, investors told Department of Health They rarely fund startups with strong fundamentals.
There will be a greater focus on investing in startups that have profitability or a path to profitability, Mohanty said. “Good companies are still getting funding, which is good for the ecosystem,” he added.
Anil Joshi, Managing Partner, Unicorn India Ventures, said: “In the current market cycle, investors will invest in capital efficient and sustainable businesses that focus on unit economics.” Funding for powerful companies.
Fintech, which accounts for 19 of India’s 102 unicorns, remains investors’ favorite sector and is expected to continue to perform well in 2023 as well. “Fintech also has huge opportunities. Governments are serious because they want credit to flow in the economy,” Damani said.
Startup founders also pointed to the government’s move.
“This growth (of the fintech industry) is supported by a number of factors, including key government initiatives to help fintech companies expand into new markets,” said Nirav Choksi, CEO and co-founder of CredAble. Capital Technologies provider.
Amid the country’s burgeoning digitization, many start-ups have started lending digitally over the past few years. This has become a key area of concern, Choksi said.
Investors believe that the fintech sector is still in its infancy and that the sector has more room to grow.
“Six million credit cards for a population of 1.4 billion isn’t even a drop in the bucket. I think there’s a lot of money that’s going to flow into the fintech-enabled ecosystem — like how you make loans,” Damani said.
In addition to the fintech and software-as-a-service (SaaS) sectors, which account for 36 of India’s 102 startups, investors are also optimistic about some of the newer sectors.
“Over the next few years, we’ll likely see more action in edtech, healthtech, deeptech, agtech, and media/entertainment,” Deloitte’s Kanabar said.
Agtech and medtech are also likely to do well, Joshi said, given the challenges the world is going through.
Siddhartha Nihalani, co-founder of healthtech startup Practo, said technological advancements and increased digital adoption will change the way healthcare is delivered in India in the coming days.
“The future of healthcare in India is very bright with innovative and tech-enabled solutions, as well as disruption from medtech startups,” Nihalani said.