2021 has been a roller coaster in more ways than one. While India greatly suffered due to the second Covid wave, the year emerged to be pivotal for startups in the country.
In many ways, it began to bring to fruition the promise that India has held for a long time: technology-first companies meaningfully denting the old economy, bringing robust liquidity via IPOs & M&A, and broader wealth creation via ESOPs.
Today, I’ll give you an overview of this year in the Indian startup ecosystem. In upcoming letters, I’ll dive into some of these in more detail.
Funding
Indian startups raised over $36BN this year, as against $11.1BN in 2020. This year saw India go from 37 unicorn companies up to 79.
More importantly, we saw several liquidity events via IPO’s led by Zomato, Nykaa and Policy Bazaar, with several others waiting in the wings.
ESOPs
ESOPs are an integral part of the evolution of a healthy technology ecosystem.
From companies –
Long disparaged as notionally valuable, compensation discussions at every level are switching emphasis towards the ESOP component. Companies are developing robust liquidity for their ESOPs, often becoming the market maker. Over $440MN went towards ESOP buybacks from employees at 32 Indian startups, including companies like Meesho, BrowserStack, UpGrad, ShareChat, PharmEasy, and Cred.
As for emerging startups –
Well compensated with liquid ESOPs at growth-stage startups, this newfound financial cushion is giving operators the comfort to spin out teams to build their own startups from scratch. Further, many of these operators are also using their liquidity to invest in startups and back their old teammates and employees, creating an even stronger and self-sustaining ecosystem.
M&A
As at Q3 2021, the startup ecosystem witnessed 119 M&A deals with a total transaction value of $3.8BN.
This includes:
- larger startups (like Byju’s, Unacademy & Cred) acquiring smaller startups
- legacy institutions (like Tata & Reliance) acquiring established startups
- startups acquiring traditional players (PharmEasy acquiring Thyrocare and Byju’s acquiring Aakash).
The year might be close to its end but it has marked the beginning of what could be India’s decade. We are excited to be small contributors and big beneficiaries of the India growth story.
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