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The growth of venture capitalists (VC) in India is one indicator of the success of the country’s startup ecosystem.
In India, 145 new venture capital firms were established in the last two years, 123 in 2021 and 22 in 2022. In 2021, there were 29% of venture capital firms in India. The 2,262 businesses that these new VCs have so far backed include 1,349 deals in 2021 and 913 deals in 2022.
While voting with the majority to raise the repo rate by 50 basis points to control inflation at the MPC meeting last month, RBI Governor stated that India is anticipated to be among the major countries with the highest growth this fiscal year, notwithstanding global unrest.
According to a research report, funding for startups fell to a two-year low of $3 billion during this July–September period (Q3CY22), compared to $14.9 billion during the same quarter of 2021, despite the rising number of venture capitalists. The amount of money decreased by 57% sequentially.
The growth of the startup sector over the past 15 years is a factor in the trend of new VCs entering the Indian ecosystem. Local-level changes have taken place. The pace of innovation has picked up, and entrepreneurs are starting companies to address pressing problems. Iconic success stories give founders the courage to take risks and hunt for solutions to issues.
In recent years, the performance of funds in terms of liquidation has also changed significantly. As a result, more investors want to contribute heavily to the upcoming innovation in the startup ecosystem.
While the international markets have underperformed, the Indian stock markets have also declined. However, retail investors have demonstrated great resilience even in the public markets, which has caused the slide in the stock markets to be briefly stopped by occasional significant increases.
Factors behind India’s substantial growth
The perception of Indian venture capital firms among investors is influenced by a number of factors.
The first is the market’s potential for expansion in India. India’s economy is expected to grow at one of the quickest rates in the world. There will be strong economic growth momentum in the Indian region. Investor interest has increased as a result of that, and the political and economic environment is stable.
All of these elements have made it possible for founders to take advantage of India’s current infrastructure and global access prices.
The second-highest recipients of Venture capital are Indian businesses & firms. US$37.6 billion was invested in businesses in the second-most populated nation in Asia, a 12 percent increase from 2020. The top five included Israel, Singapore, Indonesia, Vietnam, and South Korea, with Israel, Singapore, and Indonesia rounding out the list. VC funding fell 14% to less than $5 billion in Japan, the third-largest economy in the world.
India has benefited from China’s crackdown on soft technology. The 1.3 billion-person nation of China has long been considered a viable second-choice Asian market for international investors, but recent developments there, along with abundant global liquidity and quickly rising internet penetration, have spurred a VC bull run. India is gaining ground, while China appears to be a riskier investment for VCs.
India’s middle class is expanding quickly, and more people are using the internet than ever before, thanks to the Covid-19 pandemic. A study found that 500 million individuals will enter the middle and high-income group by 2030 if India’s GDP expands at a continuous rate of 7.5%. These statistics are a little out of date because the epidemic caused India’s middle class to shrink, but this social class is now expanding and represents a sizable market.
Final Takeaway
India lures technological startups and venture capital investment due to its rapidly expanding market. The nation just registered its 100th unicorn, a startup business with a valuation of over US$1 billion, making it the third-largest startup ecosystem behind the US and China. In reality, 130 tech unicorns with a total value of US$535 billion exist in India, according to a report titled “India Tech Trends” as of March 2022. According to the estimate, India will have 250 unicorns by 2025.
JC Team Capital is a leading venture capital firm based in Canada that has established strong ties with Indian companies through strategic capital. As financial partners, their strategy for creating high-growth companies is based on original, cutting-edge concepts. Visit jcteamcapital.com for more information.
