PE,VC ecosystem to invest a record US$ 70 billion by end 2021 : Bain

The Information Technology and SaaS and the Consumer Tech space were the largest recipients of investments

December 22, 2021

Blackstone, Carlyle , GIC, Advent, Baring and Tiger Global contributed to 20-25% of the total deals made.

Reliance emerged as the leading investor in the startup space with deal values amounting to US% 62 billion.

Exits including those through the IPO route tripled in comparison to the previous year.

The year saw an overall increase in the total of investment deals from 1416 in 2020 to 1914.

Venture capital (VC) investments may hit  a new high this year as 2021 is expected to close with a record high inflow of  both VC and private equity (PE) investments of almost US$ 70 billion according to a report by Bain & Company. Information Technology, Software-As-A-Service (SaaS) as well as the Consumer Technology sector are the leading contributors of this growth, according to the report. While there has been exponential growth in the sector, there have also been several companies that have exited the space during the calendar year. Reliance is seen to have led the investment charge with the total deal value amounting to US$ 62 billion.  

Venture capital companies like Blackstone, Carlyle , GIC, Advent, Baring and Tiger Global were the key contributors to 20-25% of total deals made. The exits on the other hand,are expected to be triple the value of the exits in 2020. Of this, a portion of the exits including Zomato and Urban Company were through the IPO route. The total number of investment deals rose to 1,914 in 2021 as against 1,416  in 2020. 

Patterns in investments

The report documents multiple trends in investment volume and values.  The 65% drop in deal value during the Jan-June period is seen to have recovered by twice the margin in the October-December period. Investor confidence also increased during the same period with a total of nine deals with a value of more than US$ 100 million being effected. Within the consumer tech space, edtech, foodtech, gaming as well as media and entertainment entities received a bulk of the funding. 

  • The foodtech space saw its highest valuation of US$ 660 million in the Zomato IPO.
  • Unacademy, Vedantu, Eruditus and Unacademy had the highest valuations in the edtech space. 
  • Investments in the SaaS space were spread across horizontal infra software for US$ 35 million, vertical specific business software for US$37 million and horizontal business software for US$ 20 million. 
  • The lending space saw an increase in investment by 4% from 2020, and insurtech space investments grew by 6%. Some of the startups  that led the investment wave were Acko, Policybazaar, MoneyTap and Rupeek. 
  • Fintech investments are seen to have grown to US$ 1.2 billion with the payments space claiming the bulk of the investments. CRED, BharatPe and Razorpay led the strongest deal valuations. 
  • Deals in the lending space are seen to have slowed down owing to the increased volume of distressed assets and low liquidity in the Small and Medium Enterprises (SME) space. 

The report predicts that the Software-As-A-Service (SAAS) space could prove to be the key investment magnet for the next year. With multiple sectors of the economy exhibiting a pattern of recovery, the Private Equity and Venture Capital space can expect to continue sustaining investment growth in 2022. However, the impact of the Omicron variant of the SARS-Coronavirus on the Indian economy and the global investment landscape remains to be assessed.