“Show Me The Money”: India’s Big Promise to VCs
According to CBInsights, there are seven Indian startups are already valued at more than $1 billion. If you include Micromax, Mu Sigma, and InMobi, the number would be ten. Merely 2 years ago, there were only five unicorns.
It won’t be long before large exits confirm India’s ability to deliver meaningful returns to startup investors. There have been more than sixty mergers and acquisitions in India’s tech sector worth more than $800 million in just 2015. Indian IPOs increased nine times in 2015. Also in 2015, “21 IPOs were launched on the BSE, the Bombay Stock Exchange, compared with five in 2014, the highest number since 2011, when 37 IPOs were launched.” Sure they weren’t tech startups but it shows that the domestic appetite for IPOs is on the rise — something, tech startups are very excited about.
While many Indian startups may not take the typical path to an IPO, the opportunities for exits are real and more options continue to emerge. Here are a few of these promising signs for Indian startups and investors.
IPO Me, Please
In September, the Securities and Exchange Board of India (SEBI) approved e-commerce firm Infibeam’s plan to sell US $68 million in shares. Infibeam was India’s first e-commerce IPO in March 2016, clearing the way for future e-commerce companies. Snapdeal hopes to go public in India within the next few years. It was valued at nearly $5 billion last year, and has said it is likely to IPO in India rather than on a foreign exchange. Flipkart is, also, likely to IPO in the next few years, although rumors of a merger between Amazon India and Flipkart keep making rounds. Other tech unicorns like PayTM, MuSigma, Micromax may also entertain IPOs either in India or in the US. As they go public, they will act as proxies for the broader digital startup sector where many larger investors can’t easily participate.
Acquisitions and Investments by Major Players
India’s major startups are spending significant amounts of money to round out their portfolios as they prepare for their next, more public phase of competition. Snapdeal acquired mobile prepaid recharge provider, FreeCharge for $400 million in April, then launched a digital wallet for their bundled services in September. They’ve acquired ten more firms over the last year, such as online loan platform RupeePower, luxury goods retailer Exclusively, and MartMobi, a mobile apps developer and TechStars alum.
Meanwhile Ola, another member of India’s Unicorn club, acquired rival rideshare service TaxiForSure for $200 million. Ola also acquired Qarth and trip-planning company, Geotagg.
According to Crunchbase, Flipkart wasn’t sitting on the sidelines either, publicly announcing three acquisitions in 2015 as well as PhonePe so far in 2016.
MakeMyTrip, the NASDAQ-listed travel firm, picked up last-minute booking site MyGola, 500 Startups’ first investment in India back in 2011, and has launched an “innovation fund” to invest in more startups.
It’s not just Indian firms who are doing the buying — Twitter picked up ZipDial, an Indian firm that turns missed calls into smartphone alerts, for an undisclosed amount (also a 500 Startups portfolio company). Yahoo bought Bangalore based, BookPad in 2014.
Times Internet, part of the media heavyweight, Bennett, Coleman and Company, recently announced leading an investment of $11.2 million in Haptik, an Indian concierge service. FreshDesk, another Tiger Global backed startup, recently announced its 5th acquisition.
What’s In It For Investors?
The Reserve Bank of India recently made it easier for foreign investors to sell or transfer their stakes in Indian startups, and loosened disclosure requirements. Relaxing rules like these should go a long way in attracting new investment dollars from overseas investors as well as continuing to make investing in startups attractive to local investors.
Prime Minister Narendra Modi, has promised to make it even easier for investors to both enter and exit startups through its Startup India Plan. This initiative, launched in January, intends to expand the country’s culture of innovation in technology startups to other areas, such as agriculture, manufacturing and healthcare.
There were 141 M&A deals worth US$1.26 billion involving Indian tech startups in four years from 2010 to the end of 2013, a stark increase from years prior. If you consider the massive growth in mobile phone penetration, the second largest Internet user base in the world, acceleration of e-commerce in India (which is expected to top $17 billion this year, having quadrupled since 2010) and a government that is committed to creating the next “Startup Nation” of 1.3 billion people, then the future of exits in India starts looking far more interesting.
Originally published at The StartupMash.