The brisk pace, which has seen over four deals a day and over $115 million in daily inflows in disclosed deal value — according to data collated exclusively for ET by specialist staffing firm Xpheno — comes at a time when the private equity and venture capital industry was bracing for a slower 2022 based on global and domestic cues.
The total disclosed deal value in January is six times higher than the same month last year, which saw 75 deals with disclosed value of $600 million while in January 2020, Indian startups sealed 65 deals with disclosed value of $1 billion, the data shows.
“Kicking off the year with record investments is a shot in the arm for enterprises gunning for a strong financial year closure. With year-to-date investments (in this financial year) already at the $40 billion mark and two more months to go, we are on a trajectory to witness the strongest investment year,” said Kamal Karanth, co-founder of Xpheno.
The strong showing comes in the wake of a mega year for venture capital investments as Indian startups mopped up $34.7 billion across 1070 deals in calendar year 2021, a near 200% increase from 2020 when $11.4 billion was invested across 795 deals.
Last year, the industry also saw a spike in mega deals with 97 funding rounds amounting to more than $24 billion.
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Bracing for a Correction
“It is a show of continuation of the long-term investor belief in the India tech story,” said Pranav Pai, managing partner of 3one4 Capital.
Pai is of the view that despite “significant correction in global markets lately, liquidity remains available (with) high likelihood to be allocated to emerging economies like India and tech-oriented businesses”.
Shares of newly listed tech-driven businesses have fallen 20-30% in two weeks leading up to January 28 compared to an overall decline of 5-7% in the Nifty.
Shares of online food delivery and restaurant discovery platform Zomato fell below its listing level after declining sharply. Shares of One97 Communications—Paytm’s parent, PB Infotech – Policybazaar’s parent—and CarTrade Tech have fallen significantly in January from their respective IPO prices, ET analysis shows.
Venture investors preparing for an industry-wide correction this year estimate that Indian startups are still well-positioned to deal with downturns and are more resilient.
Pointing to a slew of nearly two dozen startups filing for initial public offers in 2022-23, Pai said that “even if there is a correction this year, Indian startups are better prepared and more resilient to deal with a downturn”.
Although a large part of the January inflows can be attributed to the funding frenzy that was set into motion in 2021, investors are confident that “India continues to be the market attracting investments. Google’s investment in Airtel is a reflection of this”, said Anup Jain, managing partner, Orios Venture Partners. On Friday, the search giant announced a $1 billion investment in India’s second largest telco.
This month, seed investments accounted for 34 deals amid a continued rush of risk capital to back early-stage companies, the Xpheno analysis revealed.
Tech and non-tech mix stood at a healthy 54% vs 46% compared to total mix of 70% tech and 30% non-tech in 2020.
Industry experts such as Ankur Pahwa, partner and national leader – ecommerce and consumer internet, EY India, are of the view that investor confidence in startups should continue as the depth, adaptability, and acceptance of the ecosystem is well accepted now.
“Certainly, some sectors may see slowdown or valuation corrections but the momentum across most will sustain,” he added.
The investment boom is also set to drive the need for more manpower as it drives job creation and talent movement with more capital being deployed to create capacity and drive growth.
“What was already a hyperactive hiring year is now further set to switch gears and witness amplified hiring intent and hiring action,” said Xpheno’s Karanth.
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