“There is a limit in terms of how much Arpus can grow and many a time unlocking more markets provides a better return on capital invested,” Danak pointed out.
More than 10 start-ups across sectors ranging from beauty to payments turned unicorn in 2020 against nine in 2019.
Notwithstanding the disruption caused by the pandemic, Indian consumer internet companies continued to win the support of investors in 2020, raising a little over $8 billion, data sourced from market research firm Tracxn showed.
Companies had attracted investments worth about $11.21 billion in 2019.
The food-tech and ed-tech segments were the clear winners, as demand from home-bound consumers soared, cornering bulk of the investments. Zomato closed a $660-million financing round backed by 10 new investors at a post-money valuation of $3.9 billion while rival Swiggy raked in about $156 million in two tranches.
Ed-tech player Byju’s alone secured more than $1 billion from investors; Unacademy, Eruditus and Vedantu collectively bagged over $500 million in funding.
More than 10 start-ups across sectors ranging from beauty to payments turned unicorn in 2020 against nine in 2019. In fact, an estimated 65-70% of the investors who had placed their bets on the sector in 2019 invested again in 2020. Separately, B2B internet firms raised close to a billion dollars in 2020 compared with $3.56 billion in 2019, the data showed.
The spate of fundraises in a pandemic year is not surprising given that Covid-19 has only expedited consumers’ adoption of digital platforms. At the end of 2020, India had about 570 million active internet users against about 480 million in 2019, according to Counterpoint Research. As more users came online, companies needed to spend less on customer acquisition.
“In certain sectors such as ed-tech, health-tech, groceries, fin-tech, it became relatively easy to grow at a lower cost,” Atit Danak, principal and head of CoNXT at Zinnov, said.
Firms have also been quick to branch out to other segments, broadening their revenue streams — for instance PhonePe launched a slew of financial products focused on consumers while recently Dailyhunt forayed into the short-video space with Josh. “There is a limit in terms of how much Arpus can grow and many a time unlocking more markets provides a better return on capital invested,” Danak pointed out.
Rema Subramanian, co-founder & managing partner at Ankur Capital, and charter member, TiE Delhi-NCR, said many start-ups have looked at online consumer segments that traditional businesses did not even consider. For instance, the lockdown coincided with the peak sowing months hitting regular operations prompting farmers to sign up for agri-tech services in large numbers. Fin-tech, health-tech, agri-tech and ed-tech sectors that are aiming to capture the next set of online users will see good traction going ahead, Subramanian said, as Covid-19 was a tailwind that won them new customers and the users now want more options.
Danak feels 2021 is promising for the consumer internet space which could also see some consolidation. Travel and hospitality firms are expected to see a steady recovery in the coming years while companies focused on deep-tech are likely to attract investments. However, ed-tech may see consolidation. As schools open up, students may not be keen on retaining multiple subscriptions.
Buoyed by the Covid-led growth, a handful of tech firms are already chalking out IPO plans. Zomato aims to launch one sometime during the first half of the year. “I strongly believe that Indian start-ups do not need to look out to other countries for growth. There is a tremendous amount of market depth in India,” CEO Deepinder Goyal said late last year.