Indian Tech Economy – Poised for Growth

Published on 30 Apr, 2021

The year 2020 proved to be disastrous for many sectors; however, tech-based sectors witnessed accelerated growth and innovations last year. In India, several tech-based start-ups in sectors such as e-commerce, fintech, and EdTech recorded fast-track growth. The country’s tech ecosystem is witnessing brilliant evolution and has caught the attention of venture capitalists and global funds who want to cash in on this opportunity.

2021 has started on a bright note for several Indian start-ups. Almost nine start-ups including Digit Insurance, Infra.Market, Sharechat, Groww, and CRED (among several others), reaching a valuation of USD 1 billion in a short period of five years or less, have now entered the famed unicorn club. This clearly shows that India is on the path to becoming a digitally transformed nation, and the Indian technology start-up ecosystem is on an upward growth trajectory.

In the last few years, several start-ups have become unicorns:

The global pandemic of 2020 sent the world’s economy into a downward spiral but was a boon for tech entrepreneurs. Even with a depressed economy, India witnessed the launch of 1600 tech start-ups and a record 12 unicorns in 2020. Several entrepreneurs and innovators also started leveraging deep technology (deep tech) enterprises whose main objective is to provide technology solutions based on substantial scientific or engineering challenges. This space also grabbed the interest of venture capitalists and funding agencies. In 2020, 14% of total investments (an increase from 11% in 2019) in tech start-ups were concentrated in deep tech start-ups.

Other sectors that are receiving interest from investors include:

  • Edtech – As educational institutions pulled down their shutters across the country, EdTech received a boost. The sector is poised for further growth, with several start-ups in the sector receiving significant funding this year.
  • Fintech – Digital payments, online transactions, and financial tech instruments had already started their penetration in Indian urban and semi-urban areas by the time COVID- 19 hit. The pandemic spurred their usage and their adoption by fintech start-ups increased. Investment in this sector is expected to rise this year.
  • Software as a Service (SaaS) – Currently, the SaaS sector is witnessing tremendous growth and hosts unicorns including Freshworks, Druva, and Zoho, among several others. The adoption of SaaS is becoming more widespread as its benefits come to light. During the pandemic, cyber security companies experienced tailwinds as data leaks and data thefts brought forth the importance of SaaS.
  • E-commerce – The pandemic hit offline retail directly due to forced lockdowns, but it also led to e-commerce boom. E-commerce now has numerous loyal customers, and brands have realized that they need to keep enriching the user experience.

As per a financial publication, 40% of start-ups that have become unicorns in a short time are mainly from the fintech and e-commerce sectors. Some of the main funding agencies that are encouraging young entrepreneurs in India include:

  • Accel Partners – Myntra, BookMyShow, BabyOYE, Freshdesk, Flipkart
  • Sequoia Capital India – JustDial, Zomato, Practo, Groupon
  • Nexus Venture Partners – Craftsvilla, Snapdeal, Shopclues
  • Kalaari Capital – Snapdeal, ScoopWhoop, Myntra, Urban Ladder, Instamojo
  • Blume Ventures – Cashify, HealthifyMe, TaxiForSure, Belong
  • 3one4 Capital – Faircent, Licious, i2e1, Tripoto, YourStory

The pandemic supported the rise of the Indian tech start-up industry and the sector is expected to expand at 40–45% CAGR. The investments as well as deal pace will also witness a rise. As per a publication, more than 50 start-ups in India currently have the potential to reach the status of a unicorn by 2022. Therefore, it is time for India’s tech economy to shine and reach new levels of success.