New Unicorns and IPO’s: This cycle is secular and India Digital is just beginning its forward march

Manish Kheterpal
Published in
7 min readSep 1, 2021


WaterBridge Ventures Manager commentary (AMJ 2021)

2021 Unicorns (January — July)

AMJ quarter opened with the worst India has witnessed during the CoVID pandemic. The 2nd wave created havoc in most parts of India. Starting with Mumbai, peak infection rates occurred in Delhi and then in south Indian urban hubs of Bengaluru, Chennai, and Hyderabad. This time the spread of the pandemic in Bharat (India beyond the top urban centers) was also meaningful, and everyone we know was affected with healthcare issues or loss of life within their circle of family, friends or colleagues. Thankfully since early June, India started to see new infection rates receding, and the positive effect of state led lockdowns was beginning to accrue. As we write this quarterly update, new infection rates are again trickling up as India braces for the 3rd wave and new variants of the virus. Economic activity of India is bound to be affected based on how bad the future CoVID waves are for the rest of the year.

Having said that, the divergence between pain in the general economy and the prosperity in the Tech economy became more prevalent. Indian startups raised over $12 Billion in H12021 which is more than the $11 Billion raised in all of last calendar year (2020). Double the no. of new unicorns were created in the first 7 months of the year compared to the 11 unicorns we saw throughout 2020.

The sharpest excitement vector though during the AMJ quarter was the unshackling of India Tech on the bourses. Zomato (#FoodTech) debuted on Indian stock exchanges with a big bang $1.3 Billion offer, and the stock has traded up ~75% to reach a market cap of $13 Billion (crossing the symbolic INR 1 lakh crore mark several times since listing). This is a benchmark event underlining the scarcity of Tech economy IPO’s in India (since the advent of IT and IT enabled services biggies from India in the previous decade) and it is not surprising that the IPO was oversubscribed 38x. Zomato’s market cap is not much shy of the global market leader comp GrubHub ($18 Billion market cap) even though the latter’s revenue of $1.8 Billion is 5x Zomato’s revenue.

Zomato is not alone to participate in this frenzy with many more already having filed with the regulator SEBI for IPO’s planned over the next couple of quarters — PayTm (#FinTech) IPO size of $2.2 Billion, PolicyBazaar (#InsuranceTech) at $800 Million, Nykaa (#eCommerce) at $550 Million, CarTrade (#MobilityTech) at $300 Million, Mobikwik (#DigitalPayments) at $250 Million, and Ixigo (#TravelTech) at $200 Million.

We believe with the imminent listings of some of these companies and a lot more preparing to join the bandwagon, IndiaTech is well poised to add $250–300 Billion of additional market cap over the next 36 months (including some of the companies like Flipkart that are expected to list outside India).

Various sources including RedSeer Consulting

While 2020 was the biggest year for mega Tech IPO’s in the US (Airbnb, DoorDash, McAfee, Palantir, Snowflake, ZoomInfo and many more) and a record year of Tech listings through SPAC’s ($80 Billion raised in 2020), we believe 2021 and 2022 will mark the biggest years for India Tech listings.

All of this doesn’t come as a surprise to us as we believe this has been building up over the last decade and now its culminating with showtime. We track the penetration of digital in various sectors of the Indian economy and the following data shows us that ‘Digital has massive headroom to grow across various sectors of the Indian economy’ and that we will witness 10x growth in the current decade as digital becomes pervasive in the lives of the Indian consumer and penetrates deeper within Indian enterprises and SMBs.

The divergence between tailwind (Education, Health, SaaS, Food delivery et al) and headwind sectors (Travel, non Tech Financial services, Manufacturing, Real-estate et al) continues to get starker. Following captures our thoughts on how Tech/Digital penetration increase is being led in markets like the US which India is heavily inspired from, along with a special emphasis on the new frontier of growth in India (i.e. Bharat) where WaterBridge has been bullish since the beginning of our franchise. Simultaneously China announced a massive crackdown on Tech (EdTech, FoodTech, companies like Tencent, Alibaba and Didi Chuxing) eroding almost $700 Billion of market cap in 2 weeks, a move that has left most of the pundits confused (on the government’s real intentions) but certainly something that’s bound to redirect more global capital to open markets like India:

· NASDAQ is up 93% (compared to 70% for S&P 500) between March 2020 (start of the global pandemic) and now showing overall market excitement with an over-indexing of Tech. Exuberance in Tech was also seen with growth in market cap of Tech leaders like Tesla (600%), Alphabet-Google (140%), Apple (130%), Microsoft (85%), Amazon (75%), and opportune stocks like Zoom (165%) since the lows of March 2020. New Tech listings like Airbnb and DoorDash saw massive pops within weeks of their IPO while SaaS stocks soared to median multiples of over 20x (EV/Revenue).

· Around the world, consumer behavior change of several years has been brought about over the last 4 quarters towards adoption of Tech in the life of an average consumer. Acceleration in adoption of Tech for sectors like Education, Healthcare, Gaming, Internet Commerce has been even more phenomenal in low Tech penetration markets like India. Enterprise adoption of work collaboration, remote working and consequentially DevOps SaaS , software products has seen expedition in a short period of time. This means good news as we invest behind Tech disruption in select B2C & B2B sectors with a thesis driven approach.

· Rub-off positive sentiment of the $20 Billion funding in Jio Platforms from strategic (Facebook, Google, Intel, Qualcomm) and financial investors (Silver Lake, KKR, Vista, GA, Mubadala, ADIA, Saudi Arabia Sovereign, TPG, and Catterton) at the peak of CoVID continues to play out in India. Digital consumption is expected to scale new heights as digital assets are expected to scale faster over the next few yrs. in India. $14 Billion+ of funding in private Tech markets just in the first 7 months of 2021 have further underlined this trend.

· Successful (India focused) VC fund raises by Sequoia ($1.35 Billion), Elevation Capital ($400 Million, rebranded from SAIF), Lightspeed ($275 Million) were followed by fund raise announcements from Nexus ($500 Million), Chiratae ($337 Million) and Stellaris ($225 Million).

· Sectors like FinTech (CRED, PineLabs, Razorpay and Zeta fund raises), Social, Assisted Commerce (Meesho, DealShare, Grofers massive capital raises), EdTech (Byju’s, Eruditus, UpGrad further fund raises and Byju’s continued M&A spree with Epic, Great Learning), and FoodTech (Swiggy’s mega fund raise around the Zomato IPO) saw maximum activity. Further Tata group made strides in building its Digital practice by integrating ePharmacy player 1mg along with its BigBasket and Cure.Fit investments while announcing a renewed digital team and strategy. India Inc also witnessed a landmark event when a new age Tech company (PharmEasy) acquired a brick-and-mortar diagnostics company Thyrocare for over $600M.

· While Seed (indicating healthy new venture formation activity), Series A deals peaked by a big margin in the AMJ quarter, Series C+ deals stole the show underlining concentration of capital towards category leaders especially in post CoVID business models of success.

One of the themes we have been bullish on since the inception of WaterBridge Ventures is Bharat where adoption of Digital has been swift and beyond anyone’s expectations. The following shows how Bharat customers are not only consuming free content, social media but also beginning to make significant contributions to transacting customers (and revenue pools) across various Digital categories of consumption.

Metro: Top 8 cities; Tier-1: Population of 1–5M (54 cities); Tier 2+ clusters: Population < 1M

· Several of our portfolio companies (Bijnis, Chalo, CityMall, DoubtNut, MedCords, OneCode, ZipLoan) are targeting consumers in Bharat in addition to having founding teams that are specifically experienced to build game changing companies focused on this TG. Forbes India (June 2021 edition) covered this as a feature story highlighting this differentiation at WaterBridge Ventures.

We strongly believe that the Tech economy would contribute $750 Billion — $1 Trillion to India’s GDP by 2030 and therefore investment positions to back the Tech leaders of tomorrow should are being made now to participate in this massive value creation. Drying up of Chinese capital has been swiftly made up with capital from the US and domestically within India (including public markets). Case in point is the resurgent interest of Falcon Edge, Softbank, Tiger, and large commitments from multi-strategy firms like D1 Capital and Dragoneer to India Tech along with the strong public listings and a robust IPO pipeline.