For years, Indian startups were thought to be the poorer cousins of listed companies — IPOs were tracked by business papers, breathlessly discussed in the news, and eagerly participated in by investors, but startups got a fraction of the coverage. That could likely soon change, because in 2018, Indian startups have raised more money than Indian companies through IPOs.
Indian startups raiseda total of $6.55 billion (around Rs 44,940 crore) in venture capital (VC) funding in 2018 through 697 deals, In comparison, around 25 companies that floated IPOs on the Indian stock markets together raised around Rs 34,117 crores (around $5 billion) from the investors. And while 2018 was the first year in which startup funding exceeded IPO funding, the trend is likely to continue — in 2018, funding for startups nearly doubled from 2017, while those for IPO fell by more than half.
The startup funding numbers were bolstered by some massive deals which were signed during the year. Oyo Rooms raiseda whole $1 billion in a single round, as did Swiggy, which raised another $1 billion. In comparison, the biggest IPOs were for Bandhan Bank, which raised around Rs 4,473 crore (around $652 million), followed by Hindustan Aeronautics, which raised Rs 4,144 crore (around $ 604 million), and ICICI Securities which raised around Rs 4,017 crore (around $586 million).
But the sudden increase in startup funding is possibly a consequence of what stage of their lifecycle most Indian startups are currently in. Until a few years ago, angel funding for startups was at its peak, and lots of new ideas were getting funded. Most of these startups failed, but the ones that did survive are now big players in their spaces — Oyo, for instance, is biggerthan the top four listed hospitality firms in India combined, and Swiggy could give most traditional restaurant chains a run for their money. These startups have begun attracting large amounts of funding in the hope of making them turn even bigger — Oyo, for instance, has raised a massive round by Softbank and begun operations in China.
And foreign money has been plentiful for Indian startups as well. International VC funds are all bullish on India at the moment, hoping to replicate the kinds of successes they saw in China, and are making big bets on young companies. Softbank, Naspers, Tiger are all international giants, and with their and the like have changed India’s startup scene, . And India’s startup funding going past IPO funding might just signal the gravitational shift in which companies now create the most value. It’s not necessarily the stodgy old firms that get listed that are now the most valuable — startups that are moving fast and breaking things are quickly zooming past them.