Even as the number of unicorns has gone up by 13 in the July-September period, the number of deals closed decreased by 24 per cent compared to the previous quarter, according to a new report by National Association of Software and Services Companies (Nasscom).
The number of deals has declined from 160 in the second quarter of the current calendar year to 121 in the third quarter. There were 175 deals in the first quarter of 2021. Total funding is also down by 6 per cent to $6.1 billion from $6.5 billion in the second quarter.
Large deals gain momentum
According to the report, large deals are gaining momentum with 75 per cent of deals above $100 million compared to 71 per cent earlier. Smaller deals under $25 million has fallen to 8 per cent compared to 9 per cent earlier. Foodtech and edtech together attracted 46 per cent of total funding in Q3 CY21. 5 out of 13 unicorns added in Q3 CY21 are from the edtech and fintech sector.
Focus on deep-tech
Nearly 15 per cent of investment deals by volume cater to start-ups in the deep tech space. Deep-tech is also being deep-rooted into start-ups’ DNA with over 19 per cent of tech start-ups leveraging deep-tech solutions to build product competencies for market expansion. This has given momentum in the deep-tech space with increased interest from venture capital firms. Around 14 per cent of total investments in 2020 were in deep-tech start-ups up from 11 per cent in 2019. 87 per cent of all deep-tech investments were in AI or ML start-ups in 2020.
Also see: About half of workforce likely to return to offices thrice a week by January 2022: Nasscom report
These are significant changes from the initial rush of young entrepreneurs who were merely replicating successful business models from the silicon valley, primarily aimed at retail consumers. While these businesses have made services such as booking a cab or a hotel room more affordable and convenient, the reality is that Indian start-ups are way behind in terms of creating products as Google and Microsoft does. This could be a thing of the past soon with more Indian start-ups now focusing on creating solutions using deep-tech such as artificial intelligence, analytics, augmented reality/virtual reality, blockchain and internet of things, among others.
“India desperately needs these deep tech start-ups in order to take digital transformation to the next level. Current digital technologies such as mobile and cloud help enterprises in their digital transformation journey. However, solutions based on deep-tech add another layer on this transformation to solve real-life problems in areas like health care, fintech, agriculture and water management,” said an expert
