Crypto, capital, customer retention, climate change to influence start-up ecosystem
Year 2021 was an important year, as we saw trends and behavioural changes — that were inititated during 2020 — consolidate both at an organisational and individual level. It was a year of resilience, innovation and trend-setting for the coming decade, as we saw over 43 Indian start-ups become part of the coveted unicorn club. Indian start-ups saw a total infusion of over $36 billion (200 per cent jump over 2020) and an exit option of IPOs finally coming to a conclusion, with the blockbuster listing of Zomato. It was a year of maturation of the Indian start-up ecosystem. Also, a year when almost every sector received investor and public attention — though tech was the underlying factor. But some sectors that stood out were fintech, consumer (primarily driven by D2C brands), SaaS and gaming.
Trends to watch in 2022
1. Consolidation of capital: One of the prominent trends that got initiated during 2021, was the consolidation of capital among particular sectors, start-ups, and stage of start-ups. A lot of late-stage start-ups saw multiple rounds, even post the unicorn round. CRED, Meesho, Razorpay saw their already huge valuations jump three to four times in a single year. We also saw the advent of pre-IPO funds in India, with capital primarily being used to drive inorganic growth through acquisitions and marketing. This trend might continue , and we may see the gap between heavily funded and unfunded start-ups widen if the liquidity reduces.
2. Customer retention to become key: A lot of funding was used for inorganic growth, to acquire customers. Now that the customers are onboarded, it will become imperative for companies to focus on retaining them through feedback loops and multiple points of engagement. Hence we might get see supply chain innovations in the same endeavour.
3. Web 3.0 : Cryptocurrency and blockchain achieved prominence globally with two Indian cryptocurrency exchange start-ups achieving unicorn status in 2021. We might see some clearer regulations from the RBI and the government and get to see their own digital currency, making the next six to 12 months crucial for Web 3.0.
4. Sustainability and climate change: Covid-19 rang an alarm on the importance of sustainability. Both government and business world started working on reducing carbon footprint and clean solutions. A remarkable breakthrough was the slew of electric vehicle (EV) start-ups like Lohum and Ola Electric that emerged. With enough backing, 2022 could be a breakout year for EV start-ups.
5. Venture debt and alternate financing: Venture debt in India had a breakout year as start-ups raised more than $600M, more than double the previous annual high of $300M in 2019. Non-equity financing has gained prominence in recent times with domestic founders, given its benefits such as no/less equity dilution, flexible terms, supplier programs, etc. With the start-ups in India maturing planning international expansion and looking to acquire, venture debt players could become the go-to partner for all start-up debt needs.
Ishpreet Singh Gandhi, Founder and Managing Partner, Stride Ventures
(Ishpreet Singh Gandhi is Founder and Managing Partner at Stride Ventures)