Indian Startups : Emergence of a new investment asset class

We always over estimate the change that will occur in the next two years and underestimate the change that will occur in the next ten. Startups, globally, have been seen as nation builders and in the recent years India has witnessed a new wave of great entrepreneurs rising from rising from every corner of the country.

According to the Department for Promotion of industry and internal Trade (DIPP), India has 300 plus incubators and accelerators managed under several schemes provided by Central and State Government. Most recently, Piyush Goyal, Minister of Commerce and Industry announced that the current number of registered startups with DIPP stands at 21,000 in 2019. Digital inclusion comprising of voice, video and vernacular are becoming part of day to day lives with deep internet penetration. India now has 451 million monthly internet users, second only to China. Despite the huge user base, internet penetration in the country is only about 36 percent, indicating much headroom for growth! Like China, India's big adventage is a huge and vibrant domestic market. With increasing number of aspirational and technology embracing entrepreneurs, development of disruptive innovations, favourable regulatory environment and declining cost of doing business the country is on the path of churning out unicorns - privately held startup companies valued at over $1 billion.

The IIFL Wealth Hurun India Rich List 2019 revealed that out of 21 unicorns existing in India, 16 individuals from nine unicorns added 27,800 crore wealth this year. The individuals contributed 13% of total software and technology wealth with an average wealth increase of 84%. As per Hurun Global Unicorn List 2019, India ranked third in the number of unicorns.

This exponential growth has had a catalyst in the form of Angel and Venture Capital investors who have moved the Indian investment ecosystem to its second phase of - evolution since we first saw its emergence in early 2000s. Often characterized as wealthy individuals with an entrepreneurial past, Angel investors have surpassed VCs and become the biggest financier of early-stage capital for these entrepreneurs building amazing companies. Through early-stage funds, smart and sophisticated investors are becoming more formalized, organized and playing a key role in providing strategic and operational expertise for new ventures.

To integrate some of the dynamism and energy of fast-moving startps many investors have been strategically investing in order to set up partnerships with new and nimble players in the market. Venture Capital firms have been providing an early endorsement of quality for entrepreneurs and have alleviated uncertainty around the initial stages of development. VC firms have been taking home multi bagger returns averaging anywhere between 60 to 85% IRR (internal rate of return)

This investment class is here to stay and India is just beginning!