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Investible India: Definitive destination for LPs

The Olympics continually reinforce the belief that there is no greater sporting spectacle than the Games. In fact, a sportsman aiming for an Olympic medal is akin to a startup founder: both enter the field with a burning passion to accomplish something that no one has done before them. Failures and defeats strengthen both, and both believe in that magical trait called timing. 

There is, also, no better time than now from an investment perspective: a July 2021 Venture Intelligence report states that H1 2021 registered 693 PE/VC investments in India worth $28.9 billion. This is an increase in investments by 33% compared to H1 of 2020 wherein $21.3 billion was invested across 708 deals.  

In the Indian VC space, it’s raining unicorns amidst an unprecedented funding spree for Indian startups across sectors. Well over $20 billion has been raised till July this year, with several of the rounds producing unicorns in 2021. With 13 large startup deals worth $2.9 billion, the first half of this year has broken all records. Consequently, the average deal size was also the largest-ever average in H1 at approximately $24 million – double the previous year’s average.  

We are also fortunate to be living in a time in India’s startup ecosystem when most investors waiting for VCs to begin delivering cash exits for their early finds have seen a year with a record number of IPOs from young entrepreneurs who have scaled and demonstrated unwavering commitment to their mission. At the same time, we are also witnessing acquisitions of startups by legacy business houses and domestic corporations in addition to the well-funded startups themselves.  

The size of cash acquisitions touching $1 billion or a Zomato IPO raising over $1.25 billion has set new benchmarks for startups to cross. The Indian ecosystem has matured and is now headed upwards – for investors who supported these entrepreneurs, their patience is being handsomely rewarded. 

Apart from investments and exits, records continue to be broken on a third front as well: this accelerated pace is already evident in the number of Unicorns being added every year: from 8, 11 and 12 respectively in 2018, 2019 and 2020, the first 10 months of CY2021 have seen 32 Unicorns joining the league – more than the total added in the last two years. It is further supplemented with exits similar to Dragons (a company that returns entire fund in an exit – ‘a fund maker’) in startups such as Uniphore (YourNest: 16x/6.6x), Purple (Ivy Capital: 22x), PolicyBazaar (Inventus: 22.3x), WhiteHat Jr (Nexus: 14.4x) and boAt (Fireside part exit to Warburg Pincus). 

International studies have shown that having a Dragon in the portfolio is 4-10 times more complicated than a Unicorn. While we consider at least four startups as Dragons from the YourNest portfolio, there are many others emerging across our peer early-stage funds: nothing gives us more pleasure than to see the ranks swelling with such large potential exits. 

The VC eco-system has also seen stellar acquisitions this year: the Tata Group buying a 64% stake in BigBasket for $1 billion and then 1mg; Reliance Jio acquiring at least 23 startups in the telecom vertical alone… established business houses are acknowledging – and acquiring – startups that have scaled and stood out. Family offices are stepping out boldly to invest in tech-enabled SaaS sectors. There are several more mega startup IPOs lined up that will give handsome exits to early investors. And, last year, Google allocated $10 billion for investment over 5-7 years in India – the impact of this will be felt now.  

All these can be summed up in a single word: timing. All indications are that 2021 is a landmark year for startup investments and as an alternate investment class, early-stage funds are bound to perform exceptionally well. For any investor, there is no better time than now to enter the field. 

Because only when we believe and invest in the India tech-enabled startup story can we live up to the Olympics motto: Citius, Altius, Fortius… Swifter, Higher, Stronger. 

Sunil K Goyal is managing director and fund manager, and Mohit Hira is venture partner at YourNest Venture Capital. Views are personal.

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