Analysis of Venture Capital Industry Trends in 2021

The year 2021 has witnessed a record-breaking venture capital (VC) investment in India. Venture capital is a type of private equity and Seed to Series D round financing that startups or small businesses less than ten years old with long-term growth potential get from investors. Such investments usually come from well-off financial institutions, angel investors, and investment firms. With a total of 741 VC investments worth $3.1 Billion, there has been an increment of 64.9% in these investments compared to 2020 bagged a total of $1.9 billion investments from 615 deals. 

Figure 1: VC Investment in India During 2021

(Source: India Venture Capital Report 2021)

Edtech and Fintech were the two sectors that continued to attract noteworthy investments from investors in India. Apart from this, insurtech also kept the VC investors busy in putting their funds in this space, given the insurance’s low penetration in the country compared to other jurisdictions. Among all the deals finalised in 2021, Atomberg Technologies, Velocity, Adda247, Fashinza, Toothsi, Teachmint, GoBolt, Klub, Slice, and Haber Water Technologies received $20 million each as the venture capital. 

Investments by Sector

Tech and tech-enabled companies were favourites for investors during 2021 as a total of 644 investments were recorded with a cumulative worth of $2.8 billion. On the other hand, the non-tech investments accounted for only 97 deals worth $383 million. 

Figure 2: Tech vs Non-Tech Investments in 2021

(Source: India Venture Capital Report 2021)

Figure 3: Consumer vs B2B Investments

(Source: India Venture Capital Report 2021)

The most significant non-tech VC investments were in skincare startup Minimalist and FMCG company Wingreens Farms. In addition to this, among B2B and B2C companies, the latter raised $1.7 billion from 414 deals while B2B firms got 327 investments worth $1.5 billion. Enterprise software was the preferred sector for VC funding in 2021 as the deal volume was 168, with a net worth of $696 million. The highest investment deals were closed by the B2B buyer intelligence startup Slintel, B2B marketplace startup Fashinza, and B2B logistics startup GoBolt. 

The second spot was taken by E-commerce companies as they bagged 116 investments worth $478 million. Top investments in the sector went to companies like LoveLocal, Curefood, G.O.A.T, and Cashify. 

The fintech sector received approximately $625 million through 114 investments, and the key players with the highest investment amount include Onsurity, Leap Finance, and Qapita. 

Investments by Stage

There are mainly five stages of venture capital investments, namely the Seed stage, Start-up stage, Early-stage, Expansion (growth) stage, and Bridge stage. The first stage is about approaching the angel investors to fund the idea or prototype. In the Startup stage, the idea is converted into a sample and a business plan is formulated based on testing results, market research, and forecast. The Early stage is where the product is available in the market, and the business is competing against competitors. The funding required in this stage goes for manufacturing, marketing, and sales. In the Expansion or Growth stage, the motive is to seek funds to expand and scale up the business or its production. The last stage is called Bridge or Pre-IPO stage, and here, the company’s goal is to go public so that investors can exit and earn profit. The aim is to arrange funds for transaction activities. 

The startups and businesses in their early stage were also focused on by VC firms as they made 637 investments worth $2.3 billion in 2021, which is nearly 27% more than the deal volume of 2020. 

Figure 4: VC Investment by Stage in 2021

(Source: India Venture Capital Report 2021)

Figure 5: Stage-Wise Investments in 2021

(Source: India Venture Capital Report 2021)

However, a dip of 7% was noticed compared to 2021 in the investments done in Growth Stage companies. The overall share of Early-Stage deals stood at 86% in 2021. 

Investments by Round

395 deals were signed between businesses and VC investors in the seed round in 2021 which is higher than the volume recorded in 2020. In the Series A round, 242 investments were received and the number was still higher than the previous year. However, in the remaining Series B, C, and D rounds, the overall investment decreased marginally. 

Figure 6: Investments by Round in 2021

(Source: India Venture Capital Report 2021)

Investment by Region

In 2021, Bangalore retained the top and most preferred region for VC investments with an overall 282 deals with a valuation of $1.3 billion. The key startups that sealed the highest investment deal from Bangalore were Velocity, Klub, and Teachmint. The second spot was taken by Delhi NCR with 202 VC deals worth $0.8 billion and Mumbai grabbed the third position with 108 investments and total funding of $0.6 billion.

Figure 7: VC Investments by City in 2021

(Source: India Venture Capital Report 2021)

Most Active-Investors

In 2021, Indian startups and small businesses have successfully mopped up $3.1 billion from the VC funding. These investments geared up the Indian startup ecosystem and changed the whole landscape of the economy of the country. Some investors have poured money into various innovative businesses and startups in India in the past few years. Along with 53 investments, Sequoia Capital India is the most prominent and active VC investor to date. Out of all the funding is provided in 2021, 20 of them are follow-on investments, and 33 are completely new investments. The investment portfolio of Sequoia includes businesses, such as Klub, Sintel, Faze Technologies, BeMinimalist, Coinshift, Aqgromalin, Toplyne, and many others. 

Table 1: Most Active Investors in 2021

(Source: India Venture Capital Report 2021)

The second most active investor is Blume Ventures which made 19 follow-on investments and 15 new deals, including neo banking startup Zolve, fintech startup The Money Club, and logistic tech startup Freightify. The other key startups funded by Blume Ventures include Slice and Ultrahuman. Other major players in the VC funding are Accel India (32 Investments), Elevation Capital (25 Investments), and 3ONE4 Capital (25 Investments). 

Figure 8: Total Number of Investors (Country-wise) Who Invested in Indian Startups in 2021

(Source: India Venture Capital Report 2021)

India is a huge market not only for domestic investors but also for global players as well. In 2021, 825 domestic funds were invested in India-based startups, 442 investors have roots in North America, and 163 investors were from different Asian countries. 

Liquidity Events

With 123 exits occurring in 2021, the VC investors harvested $9.7 billion. Different transaction activities helped them in fetching funds from the businesses. The year 2021 has been crucial for investors as they offloaded shares through public markets across 13 transactions of a total valuation of $2.5 billion. The biggest and most prominent sale carried forward by VCs last year was the $2.3 billion from Billdesk through strategic sale to PayU, providing a safe and secure exit to Temasek, Clearstone Ventures, TA Associates, and General Atlantic. This came after the $1.3 billion exits of investors, such as Alibaba, Ratan Tata, and Berkshire Hathaway from payment gateway giant PayTM through IPO. 

Figure 9: Amount Released from Exits in 2021

(Source: India Venture Capital Report 2021)

Mega Funding Rounds

Mega funding round targets investments larger than $20 million in companies that are no older than ten years. In this category, Indian startups accumulated total funds of $34.7 billion in 2021 via 1070 investments. The largest such investment of $1399 million was done by Prosus Ventures, Footpath Ventures, ADQ, Owl Ventures, and others in Edtech startup BYJU’s making it India’s domestic unicorn with a valuation of over $21 billion. This was followed by the fantasy sports startup Dream11, which raised $840 million from RedBird Capital Partners, D1 Capital Partners, TPG Capital, Footpath Ventures, and others. 


In 2021, corporates along with their venture arms participated in 131 investments compared to 121 investments in 2020. However, the capital does not always come in the monetary form, but in some cases, it can also be provided as managerial expertise or technical support. Following the trend of VC investment in India, the growth is expected to remain healthy in the coming years making India a major hub for VC investments. India offers diversity in investment options to investors around the world, making them choose the one they find beneficial in the long term. Investment in e-commerce, fintech, edtech, and FMCG can be a healthy option for venture capitalists.