Taking a Breather After a Stellar 2018: Watchlist for Indian Top Deals
Indian ecosystem gave birth to 26 new unicorns last year, and this number is likely to grow in 2019. We selected 75 recently funded innovative startups to track the PE/VC trends in the country.
Our H1 2019 report discusses the key trends, opportunities, and sometimes hurdles facing the venture capital market globally. This edition focuses on detailed analysis of the funding trends in India market.
Funding environment trends
2018 has been a blockbuster year for India’s capital market. In 2018, India broke all previous records by total deal value and amount. Deal value in 2018 had reached a record high of USD 10 billion across 770 transactions. Venture funding in the country got off to a weak start in 1H 2019 with USD 4.5 billion total deal value. This, however, can hardly be explained by data lags, so we assume it may be more of a return to historically high levels.
Investments in startups have continuously increased from 2016 to 2019. The more than 100% CAGR growth in total fund flow implies us the rise of confidence investors have in the market, compared with a 42% CAGR in terms of total deal amount from 2016 to 2019. Furthermore, the average money for each deal increased to USD 13 million in the first half of 2019 from USD 6.3 million in 2016.
On the other hand, deals are becoming larger. The increasing number of Late stage (Series E and after) investment is one of the major factors contributing to the trend. The share of Late stage deals in total ventures investments has progressively increased and accounted for 36% of all investments made in 2018 by value.
Growth stage (Series C to Series D) and Late stage deal might have attracted funds willing to take bigger bets, total number of Seed stage (Angel, Pre-Seed, Seed) and Early stage (Series A and Series B) deals continued to increase. In 1H 2019, investment in Seed stage stood at USD 151 million across 140 deals while Late stage at USD 1.5 billion across 19 deals.
All these trends combined leads us to an interesting finding: investors are deploying capital cautiously and emphasizing more on virtuous business value.
In 2018, India eight unicorns, compared with nine unicorns in a span of 6 years from 2011 to 2017. The 2018 list includes insurance aggregator PolicyBazaar, which keeps raising the pile of money this year from SoftBank, Paytm Mall in E-commerce sector, hospitality company OYO, food technology companies Swiggy and Zomato, and educational technology firm Byju’s.
Top startups investments in 1H 2019
While India did not see any USD 1 billion+ rounds during first half of the year, the country attracted several prominent investors and strategic investment leaders. Logistics firm Delhivery joined the coveted unicorn club with a fresh round of funding led by Softbank, which also marks the largest funding on our 1H 2019 map- USD 413 million led by SoftBank Vision Fund. Softbank also participated in a USD 200 million investment in online grocery platform Grofers, followed by Sequoia Capital, Tiger Global Management and so on.
Top 9 companies captured 37% of the total funding raised by Indian startups, with some of the popular deals being OYO (raised USD 100 million from Chinese ride-hailing behemoth DiDi Chuxing, and Airbnb also got interested in OYO, following DiDi with an USD 75 million injection into the company), Delhivery mentioned before, and trucking company Blackbuck (USD 150 million).
In 2018, with the USD 16 billion acquisition of Flipkart by US retailer Walmart, digital payment firm Paytm announced USD 300 million investment led by Warren Buffett-owned Berkshire Hathaway in India, India witnessed the busiest year ever.
We selected 75 companies from thousands of startups that announced new funding rounds in the first half of 2019 and explored the unique ideas behind these startups. Finance/FinTech startups grabbed the highest funds in the hub, with USD 1.4 billion investment made. At the second place came the Mobility startups.
Let's bring more into the limelight:
The number of active internet users grew by 3.95% year-on-year to 500 million in India last year, according to NASSCOM's yearly report. Last year, the year-over-year growth was 11.34%, suggesting the country saw a gradually mature stage of smartphone usage and cost saving in terms of data. 17 out of 26 companies that fall into the finance sector are engaged in lending business, offering loans for SMEs (Small-to-medium enterprises), college students and personals.
One common feature of these companies: They combine technologies, big data and artificial intelligence (AI) with experiences of financial services professionals to analyze one’s credit score and assess risks, and offer micro-finance and commercial capital. Ziploan avails small business owners who are usually ignored by large institutions due to the limited scale of operations apply for and get loans to grow their businesses. Other technology-enabled companies targeting at SMEs include Lendingkart, Kinara Capital, and Happy.
InCred and Innoviti offer more types of loans from consumer loans, home loans, education loans, and SME loans; KrazyBee, a loan platform for students, supports college students with no credit history to avail personal finance at maximum ease and minimum time; ZestMoney provides online application for personal loans; Suryoday Small Finance Bank features in providing loans to women from economically weaker sections and unable to access to traditional banking services. Annapurna Microfinance offers both loans and insurance plans for loans; Softbank-backed online insurance company Policy bazaar has achieved the elusive unicorn status. The firm announced USD 152 million Series F round of funding in May.
Coupled with prevalent mobile wallets and cashless technologies, Point of Sale (POS), Unified Payments Interface (UPI) are leveraging Indian’s lending, payment, insurance, and financial services. Some prominent startups in this space are payments applications developer BharatPe and Provider of mobile point of sale (POS) terminal Mswipe Technologies. Founded in 2018, BharatPe raised consecutively two rounds of financing within less than four months.
Transportation & Logistics, Auto & Mobility
Transportation & Logistics
Technology-enabled logistics startups have emerged in India. Trying to solve information asymmetry pain point in transportation, fleet management firms Blackbuck and Locus.sh intend to improve efficiency of logistics by providing route planning, vehicle allocation service, and in-transit trucking. Softbank-backed Delhivery offers broader management tools. Rivigo specializes in full-truck loading, less than truckload (LTL), cold chains management.
Auto & Mobility
Ola raised USD 503 million in four rounds. Founded in 2017, Ola’s subsidiary Ola Electric deploys charging and battery swapping systems attracted Matrix Partners India and Tiger Global’s interests. They invested INR 4 billion into it together in March. As Ola’s counterpart DiDi Chuxing in China facing competition from Dida Chuxing that provides car hitch services, Ola has its rival QuickRide. By connecting the commuters traveling in the same direction with lower price, QuickRide is disrupting Ola’s main ride-hailing services. Bike-sharing company Rapido received investment from Nexus Venture Partners in April. In the vertical of car trading, CarDekho targets at new cars while Truebil focuses on used cars.
Expanding internet users, growing the young population, swelling middle-class base all drive the growth of online retail market. The sector has seen some biggest companies such as Flipkart (acquired by Walmart for USD 16 billion). Flipkart’s Singapore-incorporated parent has infused INR 1,431 crore (USD 201 million) into its wholesale entity in India to compete with Amazon. FirstCry specializes in baby care and kid products, raised approximately USD 150 million in Jan. Community-based grocery shopping app Citykart, faces its rival Jumbotail in the sector which just got a new USD 12.7 million injection this June.
India’s 1.2 billion population has long been suffered from the scare and unbalanced quality healthcare resources. Vyome Biosciences develops drugs for antibiotics-resistant acne; SigTuple aids diagnosis through artificial intelligence-powered analysis of visual medical data. Other healthcare startups like mfine, on the other hand, aims at connecting patients and doctors through various platforms. With the development of technologies, a new set of startups emerged that focus on different aspects of healthcare, such as prescription drugs retail platform 1mg, fitness products provider Healthkart, preventive healthcare provider CureFit, medical supplies B2B marketers Medikabazaar.
India’s highly fragmented agriculture market that facing a lot of challenges such as low efficiency in aspects of distribution channels, infrastructure, and overall supply chain, welcomes its innovators in recent years. The B2B marketplace is a popular sector with some of popular deals being Ninjacart (USD 90 million from Tiger Global Management) and Waycool (INR 1.2 billion/USD 17 million from LGT Impact Ventures). Others focus on agriculture means of production (Agrostar) and finance (Samunnati).
Other sectors to watch
Some of the notable startups in real estate sector are, OYO (raised totaling USD 1.7 billion in the first half of 2019) with its latest two investment from strategic investors Airbnb and DiDi Chuxing, peer-to-peer property listings firm NoBroker and Zolo (a firm that helps students and singles find accommodation with wholesome food). Local language content and news aggregator Dailyhunt, raised USD 22 million in a fresh new round of funding from Sofina SA in May, which invested USD 25 million in Healthkart as well.
We define online food and grocery delivery as Consumer services. Several big names Zomato, Swiggy (raised USD 1 billion last December) grabbed a majority of share in the food delivery market. Online grocery firm Grofers, backed by prominent international investors like Softbank, Sequoia and Tiger Global competes with Alibaba-backed BigBasket. The segmentation is also witnessing more categories coming, with medicines delivery platform Medlife which closed INR 1.2 billion round of funding.