Monday, December 4, 2023

Investors are fighting for Indian start-ups

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In 2021, there was a significant change in India’s start-up ecosystem. Many high-profile organizations introduced themselves in the stock markets. Some of these organizations are fintech giant Paytm and food delivery platform Zomato. Some other startups like Ola and Oyo are getting prepared to make their debuts in the stock market. 

Tech startups in the country attract a record capital amount from private equity and venture capital firms in 2021. Investors put in about 28 billion dollars in tech investments across 779 deals. This represents a 200% increase in capital compared with the 9.4 billion dollars invested in 2020. 

How investors are responding to new Tech IPOs

The response to IPOs from Indian top tech startupsvary among investors. For instance, the shares of food delivery firm, Zomato made an outstanding debut and is currently up around 5.44% since it began its trading on July 23, 2021. However, Paytm dropped below 13% since it debuted on Nov 18. 

Following Paytm’s unfavourable start in the stock market, Mobikwik, a similar online payment firm decided to delay its IPO. Thus, many industry experts are critically observing fintech firms to check how well they will attract revenue and ultimately profit. 

Nevertheless, there’s a likelihood that Investors will be attracted to future IPOs. The only uncertainty is which category of companies will perform well. 

Nikhil Kamath, the co-pioneer of Zerodha noted that a lot of tech startups, especially those that are already public are currently overvalued. According to him, the majority of tech startups are not profitable and may not stand the test of time. 

Sandeep Naik of the General Atlantic believes that investors need to separate the firm’s valuation – that is, the value determined in the public market – and its basics. 

He stated in an interview that investors who put in money during the early and growth stages of firms have made so much money in India within the last two years. He believes that this is partly a result of exits through which more capital has been pumped into the Indian tech environment to help new firms grow. 

Investment in Online Gaming

Another sector that massively attracts investors is the online gambling sector. It is no news that Indians love gambling. The advancement of tech has made it possible for everyone to enjoy games on devices conveniently from their homes and anywhere they find themselves.

Gambling companies are making the real-money gaming sector more attractive to Indians as they provide platforms to enjoy localized games. For example, many Indian online casinos today offer Teen Patti real cash games. There are also games like poker online, all available to play for real money.

According to research by The Week, about 40 per cent of all internet users gamble online in India. The report further suggests that the country might overtake the UK in numbers of gamblers per capita. As a result, online gambling is a hot area for foreign investors. 

What’s next? 

In 2022, it is expected that Indian startups, especially tech firms will continue to attract capital from foreign investors. However, the pace of growth and fundraising may slow down compared to the previous year, according to Amit Anand, one of the founding partners at Jungle Ventures. 

This is because 2021 saw a huge demand of funding that was supposed to have taken place in 2020 but were disrupted because of the coronavirus pandemic, he explained. 

He further stated that if the fundraising that happened in 2021 were spread across 2020 and 2021, the value will look different. That is, the increase in 2021 will not be as huge as it looks.  Nevertheless, the environment for startups in India remains healthy. It just needs to experience a steady YOY growth rather than a one-off spike.

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