It comes as no surprise that Fintech and Financial Services have cornered a huge chunk of the funding raised this year. Fintech startups accounted for 99 of the 660 deals made this year. It accounted for $1.60 billion of the total equity funding raised ($9.14 billion). Financial services accounted for $248 million across 16 deals.
“It is no secret that we are a heavily financial services and credit starved country. And there is ample room for growth. Fintech and financial services is a massive opportunity. However, one needs to understand that it needs to be built for the long term and needs a disciplined build out. It isn’t a sector where money can be thrown and a magic formula will arise,” says Sanjay Swamy, Managing Partner Prime Venture Partners.
Sanjay also believes that in the coming few months there will be an interplay of fintech with other sectors like healthcare and education, which would further enable its growth.
RedSeer Consulting believes that there are different factors that are pushing the growth. Ujjwal Chaudhry, Engagement Manager at the firm, adds that globally fintech sees a lot of traction, also several of the global models are coming of age.
“Also, the India market is a cash market, open to digital change and transformation. The Fintech and financial services growth trends will be on for awhile,” he says.
Other sectors that found favour with investors in the first 9 months of 2018 include Foodtech and Ecommerce. Foodtech was in the spotlight primarily thanks to food delivery startups Swiggy ($310 million) and Zomato ($200 million) taking overall sector funding to $576 million.
Ecommerce raised $1.13 billion in funding across 41 deals. The leading rounds here went to B2B ecommerce player Udaan, and beauty startup Nykaa (Series D). This was, however, much lower than the $4.2 billion it cornered in the year-ago period, boosted by Flipkart’s $3.9 billion over three rounds.
In contrast, the biggest funding raised this year was by OYO ($1 billion), followed by Paytm Mall ($450 million) and Swiggy ($310 million over two rounds).
The growth in M&A, including exits, gained traction in the July-September 2018 quarter. 188 exits were clocked between January and September this year, as opposed to 157 exits in January-September 2017. The biggest acquirers that year were large corporates, mostly MNCs but also a handful of Indian conglomerates. This year, by contrast, there are quite a few big startups on the prowl besides the likes of BYJU’s, which has a long list of acquisitions to its credit.
“The exits have grown also because of the increased number of Series C and higher deals in startups. This ensures that startups like Swiggy, Zomato, OYO, BYJU’s can acquire startups that they see are in line with what they want to do and markets they want to expand into,” says an analyst.
Ujjwal adds that the overall positive mood in the investor community has ensured that exits continue to gain momentum.
Another investor that YourStory spoke to believes that the acquisition of smaller startups by the larger ones are a means for the early stage investors to look for a strategic and good exit.
Even without outright acquisitions, sales of secondary stakes have begun to rise. A case in point was the exit that TVS Shriram Growth Fund gained when it sold its stake in omnichannel beauty products platform Nykaa to Lighthouse India Fund III for Rs 113 crore. TVS Shriram fund had invested in Nykaa in its Series B and C rounds in 2015 and 2016, respectively.