‘Pace of funding for start-ups nearly recovered to pre-Covid level in July-September’

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October 15, 2020 12:30 AM

In fact, India added four new unicorns amid the pandemic. Rajan Anandan, president at Tie Delhi-NCR, expects the unicorn club to steadily expand through 2020 and 2021.

As the pandemic struck India late, start-up funding remained largely unhindered in Q1 (considered as pre-Covid).As the pandemic struck India late, start-up funding remained largely unhindered in Q1 (considered as pre-Covid).

Merely a few months back, more than half of India’s 40,000 active start-ups were struggling to raise funds with an estimated 15% having stalled operations as Covid-19 hammered businesses. However, the sector has seen a quick turnaround. A report jointly released by Tie Delhi-NCR & Zinnov showed the pace of funding has nearly recovered to the pre-Covid levels in the July-September quarter, led by seed and late stage investments.

Firms managed to raise about $2.79 billion from investors in Q3 (calendar year), more than double the $1.33 billion in funding it secured in Q2 and a shade lower than $2.84 billion companies raised in the January-March quarter.

As the pandemic struck India late, start-up funding remained largely unhindered in Q1 (considered as pre-Covid).

As demand for online services boomed, companies operating in the ed-tech, gaming, grocery segments expanded their user base, cornering bulk of the investments.
Byju’s alone garnered $1 billion in funding so far this year, touching a valuation of $11 billion. Unacademy turned unicorn after it bagged a fresh $150 million funding led by SoftBank at a valuation of $1.45 billion while other ed-tech firms like Eruditus and Vedantu also raked in a fair share of capital. The sector is estimated to have 100 million users as of August compared to 45 million in 2019, according to the report.

In the online gaming space, Dream11 has added a chunky $225 million in funding from investors including Tiger Global Management. Investors also backed Mobile Premier League (MPL) by infusing $90 million into the company. E-grocer BigBasket is reportedly negotiating a big-sized deal amounting to as much as $400 million. Deal activity in the food delivery sector has also picked up led by Zomato as order volumes touched pre-Covid levels.

In fact, India added four new unicorns amid the pandemic. Rajan Anandan, president at Tie Delhi-NCR, expects the unicorn club to steadily expand through 2020 and 2021.

“Digitally-led segments have recovered much faster than expected and in many spaces, demand is well ahead of pre-Covid levels. India is on a path to have 100 unicorns by 2025,” Anandan said.

Digital health is another segment that has seen considerable demand for tele consultation, remote diagnosis and online pharmacy services. However, travel, hospitality and mobility sectors will take the longest to recover. Ride-hailing firms will barely manage to recover about 40%-50% of pre-Covid ride volumes by the end of the year, analysts said in the report.

Additionally, the pandemic is unlikely to significantly affect the creation of direct jobs by the start-up economy as hiring in technology roles across the board will largely offset the impact of initial job losses. Besides, healthcare and education segments are also adding non-tech roles. The total number of direct jobs is estimated to be 7-7.5 lakh in 2020.

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