Indian Startups Raised Lowest Funding Since 2016, Experts Cite Pandemic And Tensions With China

The COVID-19 pandemic — and a bunch of other factors — curbed dealmaking for startups in India this year.

Indian startups raised about $9.3 billion in 2020, compared to their record $14.5 billion fundraise last year. This is the first time since 2016 that startups in India have raised less than $10 billion in a year, according to consultancy firm Tracxn.

The number of deals slumped from 1,185 last year to 1,088 in 2020. Rounds with dealsize $100 million or larger plummeted from 26 in 2019 to 20 (these rounds delivered $3.6 billion this year, compared to $7.5 billion last year), and similarly rounds with dealsize $50 million to $100 million dropped from 27 to 13. (The figures exclude investments in telecom giant Jio Platforms, which alone raised over $20 billion this year.)

However Indian startups saw a sturdy rebound in the second half of this year. In the first half, startups in the world’s second-largest internet market had raised just $4.2 billion from about 461 deals, said Tracxn.

Apart from the pandemic, another reason that affected the dealmaking was Chinese money that has slowed down since the border standoff between India and China. 

Chinese behemoths such as Alibaba — and its affiliate Ant Group — and Tencent signed fewer checks this year to Indian startups. SoftBank also provided less capital as many of its high-profile portfolio firms including Paytm, Oyo Rooms, and Ola did not raise money.

On the bright side, several startups have registered unprecedented growth. From $8 billion in January this year, Byju’s is now valued at over $11 billion. Unacademy, another prominent startup in the e-learning space, saw its valuation jump from about $500 million in February this year to over $2 billion. 11 Indian startups including RazorPay, Unacademy, DailyHunt, and Glance became unicorn (valued over $1 billion) this year.