Indian Startup Ecosystem Rewind (2021) - Displaced UK in Hosting startups, Reasons Behind the Valuations, Future Predictions and more

Indian Startup Ecosystem Rewind (2021) - Displaced UK in Hosting startups, Reasons Behind the Valuations, Future Predictions and more

2021 was one year full of events. This was the year when the pandemic did not come to an end. It was the year when the vaccines started to pick up the pace. Not only the pandemic stayed but it transformed into many forms and variants. We were confined to our homes and were still connected with the help of technology.

This was the year when we saw how crucial healthcare workers really are. We learnt how to honour them. We learnt ways to heal, and we shared the ways we found. We learnt how we can be alone and together with everyone at the same time. We rediscovered that we can overcome anxiety to rise above our shortcomings. We learnt how to smile under our masks and how to appreciate friends and family and life. We learnt how to hit back from the setback.

All these things happened in 2021, and now it is almost the end of the year. India too shared the pain and heals with the whole world. We too joined hands and faced the pandemic with courage. There was one new event that we witnessed this year and that set the tone for the rest of the year. The event we all saw was the uprising ‘valuations of startups’.

The Indian startup ecosystem saw unicorns from all directions, it was quite literally raining valuations. Companies raised a lot of capital, reached huge valuations and made a mark in this unusual year. This is the time for a startup rewind. Let us see back on this eventful year and bid farewell. This article entails everything that happened in our Indian startup ecosystem this year. First, the basics and then the technicalities, read on to witness glory.

What is a Unicorn?
Indian Startup Ecosystem in 2021 - A look back
Investments Analysis for the year 2021 (Investments behind valuations)
Unicorns Founded by Indians (Abroad)
Determining Valuations
Why we are seeing a surge in Unicorns (What explains India's Unicorn boom ?)
Future Predictions of Indian Startup Ecosystem

What is a Unicorn?

There are many jargons that go without saying in the business world. One of the most (considered) prestigious words is Unicorn. A unicorn refers to a startup (A company) that is privately held and reaches or over a valuation of 1 billion dollars. The term was first officially coined in 2013 by Aileen Lee, a venture capitalist.

She chose the mythical creature (It does not exist in reality) ‘Unicorn’ to represent the rarity of such immense successful ventures. When Aileen coined the term ‘Unicorn’, there existed about thirty-nine companies that deserved to be called unicorns.

If we look at CB insights, we will find that there exist about 803 unicorns as of august 2021. If we sort the list of all unicorns on the basis of scale, the top tier will be reserved by ByteDance, SpaceX and Stripe. Some of them have already achieved valuations of 10 billion dollars like SpaceX and Stripe. They are to be called ‘Decacorns’.

Indian Startup Ecosystem in 2021 - A look back

This year was the year of many firsts, this year we saw many things that were never done before. America chose its first female vice president, NASA touched the sun for the first time ever, space tourism became a reality, and India won its first gold medal in the athletics category.

Neeraj Chopra Gold medal in Javelin Throw
Neeraj Chopra Gold medal in Javelin Throw

Alongside all the worldly business, our country India saw something unusual in the startup ecosystem. We saw a boom of unicorns and many firsts in these many categories too. India witnessed the first health tech unicorn “Innovaccer”, the first social commerce unicorn “Meesho” and the first electronic pharmacy unicorn “PharmEasy”. These were the firsts (types) unicorns in their respective fields that India saw this year.

Well, startups are quite always the trailblazers for technology and innovation they bring to society but apart from these above mentioned ‘Firsts’, do you know how many Indian Startups became a unicorn?

The Indian startup ecosystem saw 33 startups that came under the definition of a Unicorn. That means in just twelve months, India produced something like three dozen unicorns in the country. This stunning number definitely improved India’s status in the world.

Moreover, India displaced the UK to become the third top country to have a flourishing startup hosting ecosystem. The cumulative valuations of these unicorns go over the value of 33 billion dollars and that is a new record in itself. The UK on the other hand produced 15 unicorns.

India now is ahead of the UK, France, Israel, Brazil, Canada and South Korea, on the list of top startup hosting countries. It added many unicorns, led by the online educator BYJU'S (worth the US $21 Billion), Mobile ad tech InMobi (the US $12 Billion), and travel stay finder (the US $9.5 billion). There are 33 stories to be celebrated. We will talk a little about some of them. Let us read the most glorious and biggest startups of the year for the Indian startup ecosystem.

BYJU'S (Education + Technology)

BYJU'S is an “ed-tech” platform which simply means the amalgamation of education and technology. It is one of the world’s leading ed-tech companies providing learning programs for students in LKG, UKG, classes One to twelve (K-12) and competitive exams like JEE, NEET and IAS. The mobile app uses a mix of video lessons and interactive tools to personalise learning for every student.

It has a valuation of about 21 billion US dollars. That is a massive number. The company is also in talks for a listing in the United States. It is expected that if the listing is successful, BYJU’S valuation will jump from 21 billion dollars to a whopping 48 billion dollars. It is headquartered in Bengaluru.

It is not just India’s topmost startup in terms of valuation but it is also one of the most valued ed-tech platforms in the whole world. BYJU'S has had and still has, a great growing perspective in India but the plans of this ed-tech giant is deviating a bit.

The company is planning to enter the United States and then on to other English speaking international markets. It tends to believe that these countries (like the United States) have a large untapped demand for a merger in the field of education and technology. These are developed countries with an already built strong payment infrastructure and the willingness to pay a fee. The subscription business model of BYJU'S, hopes for better demand and a better future in these outside countries.  

It is here to be noted that it is not going to be easy. Conquering the education and technology amalgamation is a herculean task. That too in a foreign land where technology is already developed and flourishing. So, fighting in a market that is already a place of the target for many corporations will be difficult. The expansion is still in talks but the effect it has on India is nothing short of remarkable.

InMobi (Mobile Marketing platform)

Going by the most amount of valuations, InMobi lies second in this list. It is the country’s second most valued startup. It is valued at 12 billion dollars. Inmobi is based out of the most favourite city for startups, is Bengaluru. It is a mobile advertising platform that helps others in optimising the ranks of the advertisements which run primarily on mobile phones.

InMobi has raised a total of $320.6M in funding over seven rounds. Their latest funding was raised on Jan 1, 2019, from a Venture-Series Unknown round. InMobi is funded by six investors. Lightbox and Tennenbaum Capital Partners are the most recent investors. InMobi has acquired 10 organisations. Their most recent acquisition was Appsumer on Oct 13, 2021.

InMobi has invested in NestAway on Mar 16, 2015. This investment - Seed Round - NestAway - was valued at $1.2M. InMobi has raised a total of $25M in a single venture fund, InMobi Indie Game Developers. This fund was announced on Jul 24, 2014, and raised a total of $25M. Data is sourced from Crunchbase.

One of the most interesting facts about InMobi is that it is India’s first Unicorn. Yes, it is true. In 2011, the startup was provided with a cheque of 200 million dollars from SoftBank and thus it became the first-ever unicorn startup in India.

The future of this advertisement focussed startup is quite interesting. According to the March 2021 news, the company InMobi is planning for an IPO in the United States at a value of up to 15 billion dollars. After being founded in 2007, and becoming the first-ever unicorn in India, it is seen as a hopeful venture. It is also seen as the torchbearer of the unicorn league that started after this company entered the $1 billion mark of valuation. The company also has a subsidiary named “Glance”, which also turned a unicorn in the pandemic year, 2020. What the future holds for this venture, is yet to be seen, for now, it is expanding as much as possible.

OYO Rooms (Hotels and technology)

Ritesh Agrawal, a 19-year-old college drop-out released the nightmares of a traveller for an affordable place to stay in and then decided to develop an Airbnb inspired online homestay service. Spotting a perfect opportunity in the then unorganised hotel market, which was worth less than $7 billion, he founded OYO Rooms in 2013. 24-year-old Ritesh Agarwal had the solution to a backpacker’s ordeal of unpleasant surprises to horrors of the “budgeted” hotels is a booking app that promises clean, affordable and branded hotels.

OYO is a global travel technology company. The aim of this company is to help people find hotels and staying locations. It also works as a connection between patrons and guests. It was founded by Ritesh Agrawal and the startup is based out of Gurgaon (Now gurugram), Haryana, India. The company now has about 10,000 employees as of now.

The startup is financed through debt and is a privately held company. OYO has been able to raise about 4.5 billion dollars up till now and has made twenty-seven investors interested with their money in the venture. Let us see through the facts and figures that shaped the hotel retail chain OYO, here in the next para we discuss the founding and funding of this startup,

OYO has raised a total of $4.6 billion in funding over 21 rounds. Their latest funding was raised on Dec 16, 2021, from a Debt Financing round. OYO has invested in OYO LIFE on Oct 30, 2018. This investment - Funding Round - OYO LIFE - was valued at ¥8.3B. OYO is funded by 27 investors. Microsoft and Värde Partners are the most recent investors. OYO has acquired a total of about 7 organisations. Their most recent acquisition was Danamica on Sep 2, 2019. They acquired Danamica for $10M.

Investments Analysis for the year 2021 (Investments behind valuations)

The Indian startup ecosystem saw a noticeable record on investments this rather unusual year. The startup ecosystem has witnessed an investment of $36 billion in privately held companies this year. This investment trend can be seen making sense as the demand for digitisation has grown many many folds amid the Covid 19 pandemic.

This year, the opus of seed-stage deals dominated nearly 396 deals aggregating to a value of 705 million dollars. Moreover, the number stood at 166 Investments at the “Series A” round of funding, which amounted to about 1.67 billion dollars. This is the data up till the 20th of December. It is to be carefully noted that most of the majority of the investments were in the direction of the IPOs that were listed in the year 2021. It was directed to the pre-initial public offering and nuanced rounds in companies like Zomato, PolicyBazaar, Ola and Paytm. If we count and add the top ten deals or investments, we will get the number 5.58 billion dollars.

In addition to the number of deals of investments, Indian startups also raised more than normal. Normal here refers to the compared rounds of the previous years that were preceding 2021. Startups raised much more than they normally do, this is quite unusual. Which matches the theme of the whole of the unusual year that we faced.  

Risk capital funds stepped up the game to take bigger and bigger bets on high growth companies. Interestingly, they put all that risk of investing capital in these companies very early in time. This resulted in companies getting more and more valuations. These higher valuations inflated the worth of these newborn businesses and led the way of doubling and even tripling their value in each successive funding round.

VC Deals in India By Year
VC Deals in India By Year

The graph above clearly shows the enthusiasm in investment deals this year. We can notice that venture capital deals in India are rising. The number is not even steady, it is mostly a jump. After a little slump in the year 2020, it picked up the pace again like before. Not only the pace and rapidness but the volume and magnitude grew too.

The aggregate value of deals that happened tripled from what it was in the initial year of the pandemic. The second year in pandemic saw an average deal of almost 33 million dollars. Such a jump in average deals proves the point that investors and Venture capital funds are bullish on companies. This year they took more risk in hope of expected future returns.

“Valuations are a reflection of an investor's exit expectations. 2021 has proven the full venture cycle for India. Some fabulous exits like Zomato, Nykaa, PolicyBazaar and others have increased exit size expectations, and consequently the valuations,” said Alok Goyal, founder and investment partner at Stellaris Venture Partners, an early-stage VC firm.

He also sounded a cautionary note while pointing out that

“markets have a habit of overreacting on both sides - in bull and bear cycles. We are seeing a bull cycle reaction right now and (won’t) be surprised if there is a bearish overcorrection in the future.”

Many companies like Fintech startup, Cred, OfBusiness, Groww, Cars24, Licious, Spinny, InfraMarket, Good Glamm Group and Pristyn Care were among the firms whose valuations grew manifold in the last year.

Number of VC Deals in India in 2021
Number of VC Deals in India in 2021

“Through 2021 we experienced a strong positive shift in the quality of founding teams, depth of markets, unit economics and exit opportunities via public markets. As a result, investors across stages felt comfortable writing larger cheques and taking more risk,” said Vaibhav Agrawal, partner at Lightspeed India, which has backed new unicorns of 2021 like ShareChat and Apna Co.

Seed VC Deals in India by Year
Seed VC Deals in India by Year

The above graph is the graph showing Seed Venture capital deals in India over the years. The number of capital deals was rising until a halt in 2020, that too got over and the growth continued in 2021. However, if we look at the average deal size, we can clearly see a good amount of growth. The average investment deal we saw was about 2.5 million dollars, which is the highest over the years preceding 2021. With this trend in the average deal size, aggregate deal value also grew to 700 from 400 in the year 2020.

With all this capital at ease and in their bank account, startups have been able to execute their strategies and thus are able to grow more than ever in the past twelve months. Moreover, they are seeking listing not only in our big nation but even in the foreign developed and technology-rich lands.

More and more investments are enabling them to grow both vertically and geographically. Most investors said that sectors that dominated 2021 like web3/ crypto, SaaS, direct-to-consumer or D2C brands and tech, business-to-business (B2B) commerce, edtech and healthcare will continue to attract funding next year as well.

“ Cycles will come and go, but the important takeaway here is that Indian entrepreneurs have access to the equity needed to get closer to their vision of being market leaders,” said Pranav Pai, cofounder, 3one4 Capital, an early-stage venture fund with investments in Licious and Koo.
“They are also taking this opportunity to strengthen balance sheets and prepare for the resilience needed to face a correction when it comes,” he added.
Today, most mature startups have dedicated corporate development teams and an exit by sale is a real option for founders now, according to Kashyap Chanchani, managing partner, The Rainmaker Group, a Mumbai-based investment bank. "Till two years ago a majority of M&As would have been out of distress and lack of options,” he said.

Some time ago, we feared that the covid 19 pandemic will impact and eventually affect the listings this year. We were surprised by startups as if they were ready for the magic trick. Initial public offerings were not in the options for startups this year but 2021 changed that.

This year we witnessed monumental shifts in how technology-led businesses expand at the maximum. Smaller startups like gaming firm Nazara Technologies went public this year but it was food delivery from Zomato's Rs 9,000-crore IPO that really set the stage for at least half-a-dozen top-league startups seeking an IPO in India.

Country No. of Unicorns
USA 487 (+254)
China 301 (+74)
India 54 (+33)
UK 39 (+15)
Germany 26 (+16)
France 19 (+12)
Israel 17 (+9)
Canada 15 (+12)

The above list is the list containing “Top countries and cities where the world’s unicorns are based out of”. We can see India is ranked third in this list of countries. It has added 33 new unicorns in this year alone.

City No. of Unicorns
San Francisco 151(+83)
Beijing 91(-2)
New York 85(+52)
Shangai 71(+24)
Shenzhen 32(+12)
London 31(+15)
Bengaluru 28(+20)
Hangzhou 22(+2)

The top cities where the Unicorns are based are also listed. San Francisco is the top tier city where startups foster growth the most. SF is the home of the startup world, the presence of Silicon Valley makes it a very favourable place to be.  

If we move down on the list and see the number 7, it is Bengaluru, the startup hub of India. Later in the list, we can also see Gurugram and Mumbai. All these cities because of their business environment and with the help of the government have turned out to be a growth nest for new-age startups.

Industry No.of Unicorns % of Total Value
FinTech 139 19.5%
SaaS 134 10.4%
E-commerce 122 8.4%
AI 84 6.0%
HealthTech 80 4.7%
Cyber Security 40 2.5%

The above list is an excerpt that we are linking to our blog. We can see that FinTech (Finance and technology) has incorporated the most number of unicorns. Not to mention that technology has occupied a huge part of our daily life amid the pandemic. This can be safely assumed as the reason why technology has grown at this pace.

During the pandemic, people began questioning a lot of things like their finances and the security that they get from money and the likes. Thus, these questions and the revelation of the fact that life is fragile led to the growth in people investing their money into stocks. We can safely say that people began thinking long term because of the pandemic. The second and third rank is held by SAAS (Software as a service) and E-commerce startups, which too is crucial to normal life in the pandemic.

Unicorns Founded by Indians (Abroad)

We read about the data about startups that went on to become unicorns in Indian borders or boundaries, but Indians won’t stop here. There are some startups that are helmed by Indians that went unicorns outside of the Indian borders.

Indians now can be seen running about 119 unicorns in India and around the world. This cumulative number contains 54 unicorns that are in India and 65 outside Indian borders. Let us talk about a few unicorns that are either founded by Indians or who have at least one co-founder who is an Indian.

  • Instacart - Instacart is an on-demand delivery startup based in the United States.
  • Clip - Clip is a finance technology (Fintech) company based out of Mexico. It is founded by an Indian,
  • Improbable - gaming company based out of the United Kingdom.
  • Moglix - E-commerce platform based out of Singapore.

Determining Valuations

When we think about valuations, we might think about some graphs and numbers and more data and more numbers. Well, you are right, it is number crunching and data drives but there is one more aspect to it, the story behind the data. And oftentimes the story enjoys more space than numbers. There are three things that need to be kept in mind,

  1. Valuation is simple, we choose to make it complex.
  2. Every valuation has a narrative behind it. A good valuation is more about the story than about the numbers. When valuations go bad, it's not because of the numbers, it's because of biases, uncertainty and complexity.
  3. When valuations go bad, it's not because of the numbers, it's because of biases, uncertainty and complexity

Why we are seeing a surge in Unicorns (What explains India's Unicorn boom ?)

It was a wonderful year for the Indian startup ecosystem. It is really interesting to see that in an unusual year like 2021, startups were able to get impressive valuations. Not only impressive valuations but they were able to become unicorns with a worth of over a billion dollars. This requires an explanation. Let us see how these new businesses with literally no past record of profit-making are even able to hold great valuations. Let us see the most expected view that the experts are saying.

Technology Sector Uprising

Before the pandemic started in the year 2020, India was a developing nation (still is). India was adapting to the major shifts in the sector of technology and slowly but surely was on the path of making the new behaviour (of using technology on a regular and normal basis) a reality.

At that time, there was a chief technological officer in almost every Indian household, who was under the age of 20 and above 12. That person was the chief in the technology sector of the house. He/She was the person if the other members of the home (who are not that tech-savvy) wanted any sort of help in that domain.

As the pandemic hit, everything came to a standstill and our dependence on technology grew manifolds. This growth made the public procure more and more technology in houses all over the country.

The CTO of the house also became the chief procurement officer for the household. As the reliance on technology became broader and broader, people became more used to it. We are seeing a massive change in consumer behaviour, and we don't think that the change is irreversible.

Now, it has been about two full years in the pandemic and the need for technology has not slowed. It has risen and only risen in the past year. This rise in the usage of technology has made possible such growth trends in this unusual year.

Each and every business, or startup has become a technology business, without them realising this thing. Today even before anything, they want to work on the technology behind the company, because they know that it will be the face of the company in the future. The future is already here.

Cheaper Accessibility to technology

The lockdown and the fact that people spent most of their time at home has led to more technology boost. We have used technology for quite everything except a few things. Phones and laptops were seen as the most important technological devices in a household. We attended virtual meetings, went on to more virtual meets, dated on our phones and ordered food from our mobiles.

This dependence has led to a huge demand for not only the technology sector but the wearable sector as well. The cheaper accessibility of smartphones and the wide range of tech devices has also led to a boost in this technology race. This race has opened the door for a fully digital economy that India will become in the upcoming years. This boost in technology has enabled a new playground for startups and thus, we see huge and handsome valuations and of course “Unicorns”

Thriving Payments ecosystem

Led by Paytm and Google pay, India is paying digitally. We are using net banking, Unified payments interface or UPI, credit cards, debit cards and all sorts of things to make our payments easy and convenient. This has led to startups expanding their respective user bases. This has also led to the digital and cashless and paperless economy that the government of India supports.

A thriving payments infrastructure also has led to growth in the valuations of startups. The reason is the fact that as paying someone becomes easy and it alters the behaviour of people transacting something, it boosts it.

A good and smooth payment gateway also lubricates the payments made to a business. This lubrication has penetrated every business in this tech-savvy India and led to more and more payments. As paying becomes easier and business transactions become more and more accessible, startups are able to maintain a healthy user base and even they are able to increase their user base in the previous year.

This increase in user base and the loyalty customers show startups are able to generate some income that proves the point of investing in them. Thus, they get more and more money from investors and Venture capitalists as they are able to see and witness a good and healthy user base.

Digital-first approach

Every business, be it a newborn startup or a 100 year old national or a multinational company, eerie business is operating with a target of a “Digital-first approach”. Going by this approach, the businesses are starting to maintain and take their online business very seriously and make their digital hand the strongest among all. This will not only help in maintaining that already established user base but it will also help them to establish themselves as a brand in this technology world.

Moreover, it is online and in the digital space than in the offline space that people discover new businesses to get their work done. Thus, digital businesses are also good at generating new customers from zero. This has also helped startups to establish themselves as a trustworthy investment for both venture capitalists and potential customers.

IPOs of startups

This year we all have witnessed that startups that are relatively young than that of established brands went ahead and listed themselves. They had, what we call an Initial public offering in financial terms. IPOs of Zomato and Paytm proved the might of these young startups.

Venture capitalists used to invest in tech companies. The reason behind that is that software is easy to scale, In fact, the software is the most scalable thing in the whole world. Softwares and digital assets can give you returns as much as 10X a year in some cases.

Now, as we all know that pandemic accelerated that trend of dependence on software and led to our more use of technology on a daily basis. When everything came to a halt, like restaurants, retail businesses and theatres and other businesses, the only sector that shined through that rough phrase was the technology sector. This is why capitalists and investors invested their money in tech businesses because it is the hottest available option of investment right now and possibly in the future as well.

Future Predictions of Indian Startup Ecosystem

The future is going to be interesting at this pace. We don't know when this cycle of great valuation will stop and it is hard to tell. The pandemic taught everyone that technology is the sector that is the best for investments. The best way and most efficient way to invest in technology is through the hands of venture capitalists. This is the trend that we saw recently in the pandemic years. We can safely and surely say that technology is going to be something that will drive growth in the future.

If we talk about the future predictions, then boss, it is on the positive side of the slope. As things get normal, people will resume working on their laptops and smartphones. This pandemic altered the behaviour of people from all over India, also the whole of the world saw a change in behaviour.

Some are saying that these valuations are just vanity metrics and some are promoting the fact that Indians will run the world and tech is the next big thing (already is). Some are even thinking of a correction in the market that the market will correct itself in the future time to come. Some are also saying that it is a unicorn bubble. What is a unicorn bubble? let us find out,

A unicorn company is one that is valued at, or above, $1 billion US dollars. A unicorn bubble is a theoretical economic bubble that would occur when unicorn startup companies are overvalued by venture capitalists or investors. This can either occur during the private phase of these unicorn companies or in an initial public offering. This is what we call a unicorn bubble.

The term is as weird and mythical as the term ‘Unicorn’ itself, but in this uncertain and unusual world, we are now probably ready for each and every ‘weird’ and mythical thing that crosses our path. Let us then witness the future with our own eyes.


This year, the volume of seed-stage deals dominated with nearly 396 deals aggregating to $705.86 million while about 166 investments series A amounted to about $1.67 billion, this data is until December 20. India is now the third most destination in terms of startups produced per year. We produced 33 this year. That is the highest of many countries.

We did even better than the United States and other developed countries in this category. India is growing insanely when it comes to the startup world. There are so many unicorns in India these days. The reasons we discussed already in the blog above. We have been betting on technology for two years now. It is the foreseeable future as far as we can see, the pandemic only accelerated it. We are seeing a massive change in consumer behaviour, and we don't think that the change is irreversible.

All these things happened in 2021, and now the year is ending. What you want to take with you depends heavily on you. As we come to the end of the year, it's time to reflect back and set the tone for the new year. It is that time of the year when we get ready to start something again and try again, and/or continue doing successful ventures in the future.

The startups in India made us proud and had shown us a ray of hope in a rather dull year. We all hope that this ray of hope broadens in the new year as explorers from all over the world continue to make our world better equipped for the future.


How many unicorns are starting in India in 2021?

India added over 33 unicorns in 2021 which takes the total count to 54.

Which industry added the most unicorns in 2021?

The fintech sector added the most unicorns in 2021 with 139 unicorns.

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