April has been an historic month for startups in India. COVID notwithstanding. The week of April 5 – 9 saw a massive six companies achieve the much-coveted unicorn status (more than $1 billion valuation). Unicorns are supposed to be hard to come by especially in light of the COVID pandemic. For India however the effect has been almost opposite as more than 1600 new startups were formed last year. This takes the total to a massive 12500 as per a report by Nasscom, India’s technology industry body. Of these 55 are potential unicorns, the report says.
Moreover, basing on valuation alone, India is the hottest market for startups in the world through the COVID period. This year alone, 10 startups have already achieved unicorn startups within the first 100 days. Another 3 are on the way within the month. Last year that number was just 11. While the US, China and UK lead in number of unicorns and decacorns, India seems to be catching up, fast. This can be due to a number of factors as explained in a report by Credit Suisse: “India’s corporate landscape is undergoing a radical change due to a remarkable confluence of changes in the funding, regulatory and business environment in the country over the past two decades……”
It goes on sighting these specific factors as influential:
(1) the natural shortage of risk capital in an economy with low per capita wealth has been addressed by a surge in (mostly foreign) private equity: these flows have exceeded public market transactions in each year of the last decade;
(2) Increase in teledensity and smartphone and internet penetration. Till 2005 less than 15% of Indians had a phone, versus 85% now; 700 million-plus people have internet access now due to cheap data and falling smartphone prices (40% penetration now).
(3) deep-rooted physical infrastructure changes: nearly all habitations are now connected by all-weather roads compared to only half in 2000, and all households are electrified now vs. just 54% in 2001;
(4) financial innovation is accelerating, courtesy the world-leading “India stack”, which has innovative applications like UPI built on a base of universal bank account access, mobiles, and the biometric-ID (Aadhaar), helped by greater data availability
(5) development of ecosystems in several sectors that now provides a competitive advantage versus global peers; for example, in technology (4.5 million IT professionals) and pharma/biotech (several Indian firms can now afford $200-300 million of annual R&D).
The first point on foreign investment has been especially influential. Here we note the special role played by Tiger Global in India’s startup scene, especially in recent months.
The Tiger’s Roar
Tiger Global has been behind majority of the investments gone towards the making of India’s recent unicorns. This year it has invested over $590 million into more than 25 startups. More are in the pipeline. Four of the six startups achieving unicorn status last week received significant funding from Tiger Global. In fact 20 of the 47 index unicorns in India have all received investment from Tiger Global.
With Scott Shleifer at its head and a reported lean team for India investments, Tiger Global has been able to fast track investments into Indian startups. Some of the founders report only two-week period between first contact and investment. This is quite a fast turnaround compared to the one month period it took to complete due diligence in 2019. This is however not the first time the New York based investment firm has dipped into the Indian market. Under its predecessor Lee Fixel ,Tiger took early bets on firms like Ola and Flipkart. Flipkart CEO and founder, Shailesh Vickram Singh captures Tiger’s important role in a tweet
it was always that – if not for Tiger investment in Flipkart in 2010, We would still be debating if Amazon of India will be Amazon 🙂— Shailesh Vickram Singh (@svickram) April 9, 2021
Tiger investments pushed the envelope in 2010-20 era and Tiger investments in 2021- decade will put Indian VC space at par with US/China https://t.co/v2rlpKITup
The incredible bullishness of Tiger Global in India does not exclude young startups. Take Infra.Market for instance, Tiger Global wrote its first cheque for the company when it was just two years old. In December 2019 the company had just raised money at a $200 million valuation, Tiger came in and only two months later it closed at a $1 billion valuation.
Some investors have however not been as enthusiastic saying “When Tiger Global values a startup at a level that much of the industry can’t match, and tends to not lead the subsequent round, there are very few firms that can invest in the following financing round.”