Why some sectors can raise capital more easily than others in India

After frenzied funding in 2021, startups in India are bracing for a funding winter. While sectors like manufacturing and the social sector find themselves in an eternal funding winter, enterprise tech, retailtech, and fintech startups are triumphing.

Why some sectors can raise capital more easily than others in India

Sunday July 31, 2022,

4 min Read

In 2011, India got its first unicorn, and now, a decade later, the country’s startup ecosystem is the third-highest in the world in terms of the number of unicorns. The 100-unicorn milestone catapulted the Indian startup ecosystem to new heights. It’s worth noting that more than 50% of Indian startups gained the coveted unicorn status within five years of their inception. What’s the reason behind the boom? It can be traced to the nationwide digitalisation which stimulated some sectors more than others. 


Within the first six months of 2022, Indian startups have raised over $17 billion. Enterprise tech, ecommerce, and fintech sectors are spearheading the funding frenzy in 2022. Since the onset of the global pandemic, industries like IT, healthtech, and retailtech have caught the eyes of investors, with startups operating in these sectors having a higher chance of getting funded. But which all sectors are enjoying the funding inflow and why? 

Enterprise technology

Enterprise technology continues to attract funding for startups in all stages in India as well as globally. The digital transformation agenda catalysed by the pandemic has propelled the need for businesses to adopt technologies into their customer journeys, business processes, and business models. Consequently, enterprisetech startups have become an epicentre for investments.

The tech sector, which minted several unicorns in 2021, raised over $16.3 billion in total funding. Enterprisetech also boasts the highest number of startups in India, followed only by ecommerce. Segments such as cloud computing, B2B SaaS, IT infrastructure, networking, and cybersecurity are reigning in the easy money era. 

Retail technology

Startups building retailtech solutions for both online and offline retailers have recorded funding tripling since 2020. The ecommerce sector alone raised $15.9 billion in 2021 and boasts the lion’s share of unicorns in India. The wave of online purchasing spurred by the pandemic has gripped Indian consumers who have migrated to ecommerce platforms. To outperform their online counterparts, offline retailers are rapidly adopting technology solutions to lure customers. Tech solutions such as last-mile delivery, app-based ordering, contactless payments, and inventory management are all witnessing an uptick in adoption.  

Financial technology

One of the first sectors to gain momentum after digitalisation and demonetisation in India, fintech continues to be an investor-favourite. The fintech industry is growing at an exponential rate, and the valuations of fintech startups have increased by leaps in recent years. The global pandemic has only furthered the fintech adoption in India, with digital payments, online lending, digital wealth management, and blockchain witnessing rampant growth.

The fintech sector boasts of 22 unicorns, second only to ecommerce. Besides frenzied funding, the industry has also seen landmark exits and an IPO euphoria. Fintech startups continue to raise capital with ease, irrespective of which stage their startup stage. 

Social sector

Startups in India’s social sector continue to face a funding deficit, even more so after the global pandemic. Even though India’s social expenditure has increased, financing remains stagnant. Social enterprises including not-for-profit startups and for-profit startups ride mainly on three funding sources—corporate social responsibility, UHNI (ultra high net-worth individuals), and HNI (high net-worth individuals) investments and retail. The perennial lack of interest from venture capitalists and angel investors has subjected startups in the social sector to limited funding. As a result, the sector has been enduring a funding winter for years.  


The manufacturing sector in India relies heavily on government funding and impetus to survive. While large and medium enterprises engaged in manufacturing keep afloat, startups in this sector face a high mortality rate. Additionally, the aftermath of the COVID-19 pandemic caused an economic slowdown, impacting the manufacturing industry the most. As the sector recovers gradually, founders can find it challenging to start up. However, this should not deter startups with innovative solutions and alternative business models from venturing into the manufacturing sector. 

Edited by Kanishk Singh

(Disclaimer: The views and opinions expressed in this article are those of the author and do not necessarily reflect the views of YourStory.)