Feb 18, 2022
2022: The 5 hot sectors in India in the Seed funding winter.
Top 5 funded Sectors and Companies in India
In 2022, seed investment for startups crossed over $1 billion in 14 different industries, with the majority of funds going to the finance and technology sectors. The Software as a service (SaaS) industry raised a total of over $16.3 billion in funding last year, producing several unicorns, or privately held enterprises with a valuation of $1 billion. E-commerce came in second with $15.9 billion. These two industries accounted for around 42% of total seed funding in India.
Funding for the financial services industry reached a record $11.7 billion. Healthcare and Sustainable segments were the next largest sectors funded by venture capitalists and angel investors. Deal sizes in FinTech and SaaS industries kept rising significantly, indicating an emerging market for seed capital investments. Particularly in the SaaS sector, transaction sizes increased as notable Indian unicorns rose to become worldwide category leaders, such as Postman in API administration or BrowserStack in automated testing.
SaaS ruled the roost in attracting funding.
The India SaaS Report 2021 predicts that Indian SaaS firms would account for 8–9% of the worldwide SaaS industry by 2021.
Indian Software-as-a-Service (SaaS) entrepreneurs raised more than $500 million in November 2022. It was about five times more than in the same month the previous year. Top investments include the $360 million raised by SaaS company Fractal from TPG Capital in January 2022 and the $400 million raised by Uniphore Software Systems in February 2022. According to a recent report by McKinsey and SaaSBOOMi, the SaaS (software as a service) market in India is expected to be worth $1 trillion by 2030. In a similar vein, the Chiratae-Zinnov India SaaS forecast for 2022 predicted that by 2026, the Indian SaaS market could generate $100 billion in sales and that in a few years, India may overtake China as the world's second-largest SaaS country. Another report by Bain & Company, the India SaaS Report 2021, predicted that Indian SaaS firms would account for 8–9% of the worldwide SaaS industry by 2021. Keka, Zoho, Agile CRM, IBSFintech, VTION, Freshworks, Playtonia, Cloudcherry, VWO, and Facilio Inc are other leading SaaS companies in India. SaaS has produced six of the country's total 18 unicorns in 2022. If the production of unicorns is a sign that a sector is performing remarkably well then India now has 16 unicorn SaaS companies. The fact that Freshworks was the first Indian SaaS company to list on the Nasdaq in September of last year acted as a significant impetus for many other start-ups in the same field.
The E-commerce Sector touched a new horizon.
With 23 in number, the e-commerce ecosystem has spawned the most unicorns in India and the entire e-commerce opportunity is predicted to reach $400 billion by 2030
According to "The State of Indian Startup Ecosystem Report, 2022," 1,282 agreements totaling $30.35 billion were completed to get seed funding for startups in Indian e-commerce firms between 2014 and 2022. With $15.9 Bn, or more than half of all e-commerce funding in India, the marketplace subsector experienced the largest level of fundraising activity during this time. In terms of money raised since 2014, B2B e-commerce came in second with $4.2 Bn. Indian direct-to-consumer (D2C) firms received $3.1 Bn in funding between 2014 and H1 2022, making D2C the third-most funded e-commerce subsector. Licious, a D2C Unicorn startup raised $52 Mn in 2021. In March 2022, it raised $150 Mn, taking its aggregate fundraising to $488 Mn. With 23 in number, the e-commerce ecosystem has spawned the most unicorns in the nation. Livespace is another e-commerce marketplace to become a Unicorn in 2022 after raising $180 Mn from KKR & Co and other VC investors. It has raised around $431 million in all. Purplle joined the unicorn club in June 2022 after raising $33 million from VC investors. It has raised a total of $215 million thus far. E-commerce unicorns are valued at $86 billion and have raised $28.6 billion in financing or around 94% of all e-commerce funding between 2014 and 2022. The Indian e-commerce industry is home to 16 soonicorns, which are collectively valued at $5.3 billion. India's entire e-commerce opportunity is predicted to reach $400 billion by 2030, and by 2025, there will be 350 million e-commerce customers, according to a report by Inc42.
FinTech Companies - achieving greater heights
Startups and fintech investors both contribute to the growth of the Indian fintech ecosystem
Buy now, pay later (BNPL), credit and debit cards, co-branded cards, fintech SaaS, and other fintech products and solutions are being developed by more than 4,200 fintech firms in India, which is quickly developing into a global fintech hotspot. According to a survey by Inc42, India's fintech startup ecosystem is expected to represent a $1.3 Tn market opportunity by 2025 and develop at a CAGR of 31% from 2021 to 2025. There have been 21 fintech unicorns in India since Paytm became the first one in 2015, and more than 550 firms have received seed capital investments since 2014. Startups and fintech investors both contribute to the growth of the Indian fintech ecosystem. Fintechs have attracted $23.6 billion in venture capital funding in India since 2014, trailing just a few industries including consumer internet and e-commerce. There have been 160 fintech deals so far in 2022, raising $3.47 billion for fintech businesses. Top deals in Indian Fintech segment in 2022 include Oxyzo ($400Mn), Cred ($140Mn), Yubi ($137Mn), Fibe ($110Mn), OneCard ($100.5Mn) and KreditBee ( $80Mn).
Indian Healthcare - Sprawling greener grounds.
In the last 12 months, 102 Private Equity/Venture Financing deals were disclosed for the seed funding for startups in the Indian healthcare sector
In the last twelve months (LTM), 102 Private Equity/Venture Financing deals (pending and completed) were disclosed for the seed funding for startups in the Indian healthcare sector, totaling about $3,717.3 million in deal value. With a total deal value of $683.3 million and an average deal value of $68.3 million in May 2022, the LTM period turned out to be the most active in terms of deal size. The most active month in terms of deal volume, however, was January 2022, which saw a total of 14 transactions with an average deal value of $11.8 million. In August 2022, Novo Holdings, a global leader in life science investments, led a $50 million investment in Bengaluru-based MedGenome, a genetic diagnostics, research, and data company.
The Government of Singapore, Norges Bank, SBI Mutual Fund, Smaller Cap World Fund, Wf Asian Smaller Companies Fund Ltd, and Max Healthcare Institute Ltd. secured the largest private equity/venture financing deal in the Indian healthcare sector, valued at $435.9 million, which was finished on March 31, 2022. Of the 102 deals, this one was the most successful. The third-largest deal involved CX Partners LLP, PAG Capital, Samara Capital Partners, and Optimus Pharma Pvt Ltd., while the second-largest deal involved Abu Dhabi Investment Authority and Intas Pharmaceuticals Ltd. Valued at $270.0 million and $259.0 million, respectively, were the transactions between the Abu Dhabi Investment Authority and Intas Pharmaceuticals Ltd. and CX Partners LLP, PAG Capital, and Samara Capital Partners and Optimus Pharma Pvt Ltd.
ClimateTechs - Put their Best Foot Forward in 2022
Funding for climate technology accounted for more than a quarter of all venture capital dollars invested in 2022
According to PwC's State of Climate Tech 2022 study, funding for climate technology accounted for more than a quarter of all venture capital dollars invested in 2022, which is in the upper part of the 20–30% range seen since the beginning of 2018. According to the first half of 2021, there has been an investment in climate technology of between $15 and $20 billion USD per quarter. Over $260 billion in total funding have been raised for climate technology since the beginning of 2018, with more than US$50 billion coming in 2022. Around 5% of venture capital funding in India goes to climate startups. As part of its series-A funding in 2022, Solar Square raised 100 crores (about $12Mn). Investors have shown interest in the electric vehicle (EV) industry in addition to renewable energy. VC investment in this industry is increasing, with investments made at every stage of the value chain, including the production and financing of EVs and componentry, battery recycling, and charging infrastructure.
Recently, Union Square Ventures invested in Rev, a company that provides charging infrastructure, Lowercarbon Capital invested in River, an Indian electric vehicle manufacturer, and Better Bite Ventures, a Singapore-based fund for alternative protein, invested in Phyx44, a company that uses fermentation to produce dairy products. Early-stage deep tech climate startups have also received funding from a few Indian VC firms, like Blue Ashva and Speciale Invest.