More first-time investors bet big on desi startups in 2021

In 2021, the number of new and first-time investors who ventured into Indian tech firms nearly doubled, owing to record investment rounds, leading to the birth of over 40 unicorns.

The number of first-time investors, who invested in Indian companies, increased to 1145 in 2021 from 708 in 2020 and 691 in 2019, as per data research firm Tracxn. According to Tracxn's statistics, American firms GoodWater Capital, 2 AM VC, Goat Capital, and others are among the new investors who have funded the country's entrepreneurs.

The number of overseas investors in Indian IT firms increased from 697 in 2019 to 990 in 2021, with the percentage of investors from the United States and the United Arab Emirates growing and money from China and Japan declining sharply. The share of American investors investing in India has progressively increased from 44% in 2019 to 51% in 2020 and 53% in 2021. The ratio of Chinese investors backing Indian startups has declined by almost half — from 7% in 2019 to 3% in 2021.

Coming off a year of record PE/VC investments and exits in 2021, EY expects 2022 to be bigger by at least 20%. “We anticipate newer PE firms to take notice of the Indian market and open their investment positions here,” Soni said. Anjali Bansal, Founder, Avaana Capital, said the pandemic has accelerated digitization across sectors like education, agriculture, healthcare, supply chains etc. and the Indian startup ecosystem is also maturing with seasoned entrepreneurs returning for their next stints.

Low yields, rising US-China tensions, and China's crackdown on IT businesses have all played in India's favour, putting it in a macroeconomic and geopolitical sweet spot. “With global fixed income yields at record lows, allocation of investments to emerging markets by global LPs is on the rise. India’s strong consumption base combined with its favorable geopolitical and macroeconomic positioning has made it an attractive destination for large investors,” said Vivek Soni of EY

Disclaimer: This information has been collected through secondary research and IBEF is not responsible for any errors in the same.