We like doing crazy things.
One of those is making predictions, in writing, after the year we just had.
But as we get ready for the future, it’s worth taking a second to sit back and reflect on what has truly been an ‘unprecedented’ year.
How does one even begin to summarise the rollercoaster, Zoom-filled ride that we have all been through together?
What’s important to remember is that somewhere amidst a devastating global pandemic, widespread social unrest, and all-consuming political sword-fighting, we made it!
AJVC readers will remember that in December 2019, we had published our Predictions for India’s Startups in 2020.
After the year we’ve just experienced, the biggest surprise may be not what came to fruition and what didn’t, but that only 12 months have passed since we published those predictions.
It has felt like 12 years.
As with everything in 2020, we had some winners and losers.
So with the year almost in the rearview mirror, let’s take a look back at some of the things that we thought were going to happen and our self-assessed rating on where we landed:
Logistics will raise most capital: While logistics companies like Xpressbees certainly caught headlines in 2020, the clear winner of the year was EdTech. Due to COVID, schools and colleges across the country were forced to transition to an online model almost overnight, and many first-time users were brought online to platforms like Byju’s, Unacademy, and UpGrad. Logistics too saw an acceleration due to people staying at home, raising $1Bn compared to EdTech’s $2.2Bn. (7/10)
B2B e-commerce will go full stack – The story here was one of value chain integration, and even more startups going after the full stack. We saw the continued rise of Jumbotail and Ninjacart, a rapidly scaling JioMart, and newer models such as Dukaan, Bikayi and Khatabook. Deeper in the value chain, Pagarbook raised ~$20m to continue building their staff management platform. (9/10)
Social commerce will consolidate – Meesho has continued its rise to become a leader in the reseller industry, with a potential unicorn valuation on the horizon, like we’d speculated. Fewer companies started as well, suggesting fewer players taking all the spoils. Sub-segments such as video commerce, influencer / community driven commerce, and group-sharing models are still up for grabs. The hard to ignore 800-pound gorilla in this industry is Whatsapp, especially after Facebook’s mega-deal with Jio earlier this year. (7/10)
Gaming startups will go mainstream – In a similar vein to EdTech, gaming and e-sports witnessed a massive surge in 2020 as people remain locked down with limited entertainment options. Ludo King became the most downloaded app in India, Dream11 doubled in valuation and got a front row seat to the IPL, and companies like MPL and Winzo experienced rocketship user growth. (9/10)
Everyone in Fintech will lend – COVID shone a spotlight on the lending industry as all banks/ NBFCs turned their focus towards re-collections and maintaining their NPA levels. Instead of lending becoming the money spinner, people are running away from it like toxic waste. Disbursements are picking up again and strong underwriting will expose the winners from the losers in 2021. Some players such as Navi Tech, KrazyBee, MoneyTap became contrarian and tried to expand market share. (1/10)
Online first brands will proliferate – Satya Nadella put it succinctly – “We’ve seen 2 years of digital transformation in 2 months”. With people stuck at home, Indian e-commerce is expected to grow 40% in 2020 v/s 23% in 2019. Companies like Nykaa flourished, Beardo had a sale to Marico, meat startups like Licious rose to the occasion, and up-and-comers such as Yoga Bar, Country Delight raised Series B funds. (9/10)
Overall, a 7/10. In 2020, a 7/10 on any prediction seems so good that we decided to do predictions for 2021.
Agritech will cross $500M funding in 2021
In a year when most of the sectors have been negatively impacted or stagnated due to the pandemic, Agritech has held fort and been a shining light for the overall ecosystem.
As the stalemate on the current Farm Bills is resolved and farming moves to become more market oriented, we expect investments to flow into tech-enabled supply chain and output market linkages, warehousing and storage and precision agriculture and farm management
After raising ~$150M this year, we expect agri-tech raise to more than triple in 2021. While it seems ambitious, we see that Agri Tech is evolving on the lines of the Microfinance era.
MFI initially started with grant capital, moved to social incubators/ accelerators, and then impact funds. In the final phase it saw participation from commercial VC/ PE when the unit economics became sustainable and business models were solidified. Successful businesses from there are Five Star Business, Fusion Microfinance and others.
Agritech is seeing a similar trend and has reached a tipping point where regulatory clarity, large markets with massive inefficiencies, strong founders with domain expertise are focusing on farm level profitability to build sustainable models. A few trends are taking shape.
The first is that farming will go back to basics. More indigenous methods and crops will be deployed as they are resilient against climate change.
The second will be homes converted into farms. Whatever space is available will be used to grow vegetables etc. like gardens, rooftops. A new Farm to HH to Consumer model could evolve and Hydroponics could move beyond being a lifestyle business
The third is that economic downturn and the possibility of a double dip recession could exacerbate labor shortage in agri. This will force growers to adopt automation and robotic solutions to mitigate this loss.
Lastly existing players which are scaling up rapidly (Ninjacart, Waycool, DeHaat, Agrostar etc.) will focus on going full stack to become a one stop solution provider to farmers right from input purchase to output sale. They will look to buy or partner with smaller players to add more capabilities in their existing offerings
A few startups which look interesting to us in the space include Clover Ventures (greenhouse grown produce), Urban Kissan (commercial soil-less farming) which are creating fresh-produce supply chains through demand-led cultivation model and Krishitantra which offers IoT based soil testing to farmers, FPOs according to their specific landholding.
SaaS will be India’s Most Funded Sector
India has been regarded as one of the dark horses in SaaS in the world.
We see it as only building on the waves of India exporting services, product+service and now pure products.
India with its talented engineers usually understands technology, builds economies of scale, and sells the product to the world.
India Saas companies hold a global share of nearly 2.5%. But the next five years it’s set to scale 8% to Global market capture. By 2025, The global Saas is set to be valued at 1.2 Trillion, of which the Indian part is 100B in market valuation
SaaS businesses are profitable, with 70-80 percent gross margins and will support to attain higher ARR starting in 2021. Suggestions that ARR is set to grow for more start-ups due to high adoption make sense.
But 2021 will proliferate for other SaaS businesses and not just the giants. The Indian SaaS market is led by Zoho and Freshworks, but we will see the rise of many other categories.
APIs have become even more important for software to communicate with each other. Postman and Hasura horizontal enablers will now seize the overseas market as developers find it easy to build, test, run and launch the application in less time.
More vertical “enablers” will support the growing number of start-ups in India. The Hospitality industry may have taken a hit due to Covid, but Zenoti the SaaS start-up that takes the industry digital grew 100% YoY in 2020 and attained Unicorn status.
Hybrid models and work from home are here to stay even next year. We will see many more start-ups from this space. This space will accelerate the work and events culture in India.
Many startups will also sell software to “businesses who don’t pay” in India as well.
India is moving from labor driven towards a mobile-first country with affordable data and smartphones. SMBs problems will be solved at the click of a button. We will continue to see a lot more Indian Initiators built for Indian usage.
Many adopters in rural India for digital bookkeeping enabled Khatabook, OkCredit and staff management apps like Pagarbook to grow enormously. These applications will move beyond just bookkeeping and will integrate the interest payments database.
Instamojo, considered as Shopify of India with its recent acquisition of GetMeAShop is building for MSMEs and rural India.
Many start-ups in this space that have no revenue model may soon initiate and apply for an NBFC license to monetize.
As a mobile-first country and the ability to build innovative apps for daily consumer use will be mainstream.
As home deliveries increase, we will see digital facility management security SaaS models to expand into new markets. Mygate not only provides security to the consumers but is also collecting the data of consumers’ order preferences.
Overall, the tailwinds are for SaaS.
EdTech will Consolidate
EdTech became the hottest sector over 2020 as students were forced to learn at home.
UNESCO estimates that by March-end of 2020, 80 percent of the world’s student population was impacted by school closures.
In 2020, Indian EdTech attracted over $2.2Bn in investments. Edtech was one of the top-three funded sectors in terms of deal volume (84) in 2020.
In India, approximately 260 million students, a majority of them in the K-12 segment, were affected by the lockdown. As a result, migration to online platforms took place at a breakneck speed.
Between April and December 2020, ‘edtech’ searches gained 60 percent on the Indian internet, as per Google Trends. Searches for individual companies like BYJU’S, Vedantu, Toppr, and so on, gained even more.
Two events from the year also triggered a widespread coding mania in the country.
One was, of course, BYJU’S acquiring WhiteHat Jr; the second was the government’s National Education Policy 2020. Coding for kids is estimated to be a $14 billion market in India already. Even generalist edtech players like Toppr, Vedantu, and others offer live coding classes now.
That $300M acquisition is a harbinger of the coming year.
We expect the massive funding this year not to continue next year, with the capital being deployed by larger players in M&A.
Unacademy, which saw a 4X surge in its valuation this year, made five acquisitions across segments: Kreatryx, CodeChef, PrepLadder, Mastree, and Coursavy to enter other related segments in online learning
Startups who will go deeper in digitizing education will scale and potentially be part of M&A.
We expect 2021 to see digitization of value stacks in offline players.
Companies that could do this for classes are BitClass, Teachmint, Classplus. We are also seeing a rise of extra curricular online platforms (Uable, FrontRow) which might become hybrid moving on.
We expect the “Big 4” (Byjus, Unacademy, Vedantu, Toppr) to look for acquisitions to strengthen course offering and expand their offerings and target group.
Everything will Go Social
Social media is not social anymore, it is just media.
Most social media platforms have become broadcast networks. The pandemic has promoted efficiency no doubt on saving commute hours, minimising business travel, reducing the need for a plethora of events.
However a dominant theme which has emerged is the inherent need for each of us to be connected and form a meaningful social bond be it in learning (Brainly), gaming (SuperGaming), working (Slack, Airmeet) or entertainment (Netflix watch party)
2021 will accelerate this trend and we expect everything to go social.
There will be a community layer added to everything and specific niche verticals which might not necessarily be VC funded will emerge.
The rationale for social becoming a horizontal, rather than remaining a vertical is
The inherent nature of gaming being social was replicated online with Carrom, Ludo King, Teen Patti and Rummy all featuring in ‘Global Top 50’ games. India already has 300M+ gamers, with almost all games social-first.
Games are also the newest social network for kids and GenZ. Roblox’s massive success has shown that user-generated content is a massive opportunity in gaming. Fortnite’s Travis Scott concert is an indicator that new opportunities will emerge which are suited to the Indian context.
As indoor options witnessed a sharp spike more effort was made to make them community driven to provide a feeling of watching/ playing it with friends or family
Startups will realize that building communities is going to be the new way to build a strong customer base.
Companies that enable them to “go social” will profit.
HealthTech will Rebound in 2021
2020 saw HealthTech dip in funding, collapsing to $500MM in 2020 from $1Bn in 2019.
Ironically, while the rest of the world saw a surge in healthtech financing, India actually saw a dip.
But we see this more as a market cycle, rather than a permanent dip for healthtech. As people see the limits of physical infrastructure during the pandemic, many will find that it is possible to treat yourself online.
Covid-19 has been a wake up call for governments around the world to improve their health infrastructure and a tailwind for startups in the HealthTech space. Be it startups doing teleconsulting, developing medical devices, processing medical data, or helping customers stay fit while being restricted to their homes.
The urgent need for information to drive diagnosis, treatment, and other clinical protocols related to COVID-19 has resulted in unprecedented global sharing of medical knowledge.
The fact that a vaccine could be developed and launched in under a year, a process which has usually taken at least 2-3 years bears testimony to the innovation heralded through AI and rapid global collaboration
Next year, we can expect that trend to broaden across clinical areas to capture the benefits of improved access to clinical intelligence.
Monetisation will enable the explosion of telehealth services
Reimbursements for virtual care will likely be expanded through 2021, as a new hybrid model combining telehealth check-ins and in-person visits will become the norm.
We expect 2021 to be a better year for HealthTech in India. Various stakeholders (hospitals, clinics, doctors, patients) now realize the massive efficiencies driven by digitizing the various health stacks.
Accessibility will be driven through Telemedicine, affordability through low cost medical devices and quality through Healthcare Analytics/ IT
Most startups will prefer to become a one-stop integrated wellness platform. We are already seeing e-pharmacy players moving into diagnostics and teleconsultations (eg. 1mg). Another interesting trend will be to make hospitals and diagnostic chains asset-light to enable them to focus on core operations (Pristyn Care)
Logistics Will go Niche
As COVID-19 hit and many industries had taken a beating, but the demand for last mile logistics grew exponentially as everything went remote.
E-commerce is set for a $200B industry by 2026, and last-mile logistics are the biggest enablers for this.
This coupled with manufacturing slowly moving from China to India, Last-mile delivery takes the driver’s seat and is important to the supply chain to be in control.
India has the third-highest percentage increase only after China and Norway. With a growth of 19 percent in parcel volume, shipping 2.8 billion parcels and reaching a CAGR of 22 percent since 2013. India is set to grow further in 2021 amid the global pandemic.
But the last-mile delivery accounts for nearly 41% of supply chain costs, more than twice of any activity in the supply chain.
As the costs are variable, it’s more important to set up a more predictive mechanism with more reliable technology. If firms don’t optimize their last-mile delivery cost, they will see a drop in net profit as online order volume grows.
We will see new companies emerge for specific needs. Companies to close the bottlenecks and streamline the processes.
Firms that partner with third-party logistics partnering with Kirana stores to act as pick up and drop off points for shipments. This will help the shipment to reach previously inaccessible locations.
Specific unique code based logistics firms that allow customers to pick any locker location as their parcel delivery address. This unique code for each parcel reduces the delivery charges and time.
Crowdsouring logistics firms or Uber of logistics may kick in. The ability for community members with authentication to pick up parcels from nearby and deliver with no added costs for a commission.
Automation in the delivery mechanism is a potential area last-mile firms may tap into. To showcase the digital status of the products is appeasing for consumers. Dominos Pizza filed patents for the delivery tracker.
IoT integrated with 5G facilitates the availability of key delivery information such as parcel contents, parcels located in the last mile logistics. By connecting vehicles, loading, and unloading equipment, etc. through sensors installed on these devices will enable real-time processes. New last mile firms with the power of 5G and IOT may be the affordable solution
Experimentation with drones is another area that new firms are spending their R&D budgets on. For this to come to light many issues need to be solved – better batteries for flight time and range, payload issues, Aviation policies, and delivery network effect.
Through these advanced technologies data collection will be easier. Further coupled with ML and AI to optimize – Last mile may soon be able to handle the high volume at low costs while we WFH.
2020 has been the year of problems, 2021 will be the year of solutions. Many last-mile firms will collaborate to deliver COVID vaccines across India.
Shadowfax and Spice express partner to deliver Covid-19 vaccines with over 250 refrigerated vehicles through a sustainable cold chain network. They will be operating across 500+ cities to over 7000+ pin codes.
As we enter 2021, the surge in equity markets is due to the massive amount of liquidity injected into global financial systems by central banks, low repo rate, and interest rate.
With foreign capital flooding in 2021 might be the Season of an array of Indian startups listing
The IPOs listed in 2020 had a ball. As investors seeked quality assets to make returns, equity markets provided a safe haven. Start-ups restrained from listing in Q1 & Q2 due to the surge in coronavirus.
Many American companies flocked to list their firms on NYSE. Few notable ones were Snowflake, Doordash, AirBnb, Skillz, Unity, Big-commerce, etc. that grew considerably since listing. Many such as Roblox and Affirm delayed their IPO’s to 2021 due to an IPO pop observed for the ones which listed (Airbnb)
Even in India, it was one of the best years for IPO’s. Indian Tech Start-ups listed in Q3 & Q4 were Happiest minds which subscribed ~151 times and Route Mobile subscribed ~74 times. Food brands such as Burger King and Mrs. Bectors showed investor appetite
Investor appetite for quality Indian tech stocks remains high as seen by the stellar performance of IndiaMart up more than four times its listing price in Jul 2019.
We expect investors to wait to finally end as many mature late stage tech startups from India list.
At least one of Zomato, Flipkart, Policybazaar, Delhivery will IPO, receive a solid response and open doors for others to enter in 2021 and beyond.
We said we looked forward to 2020 (did we?), but we are really looking forward to 2021.
By Keshav, Omkar, Rohan, Shreyans, and Aviral
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