India’s start-up ecosystem sees strong growth

‍India’s growing digital interconnectedness presents a wealth of opportunities for investors


India is the third-largest start-up ecosystem globally, behind only the US and China. It now has 100 unicorns, having passed 85 unicorns in 2021 and adding 15 more by May 2022.

The post-COVID-19 flywheel of India's start-up economy catalyzed a series of inflection moments across sectors. The total addressable market of India’s internet expanded rapidly, largely driven by the mass migration to digital services, from education and entertainment to groceries and health. With over 800 million Indians on the internet and over 400 million millennials in the country, this is now the second-largest and youngest internet population globally.  

The India Stack, a population-wide digital infrastructure project to unite India’s citizens digitally, together with other Digital Public Goods (DPGs) and innovations that have enabled low-cost internet access, have compounded the growth of India’s digital ecosystem. These DPG systems have been designed as public utilities to support the development of products, services, and platforms. ​​At 3one4 Capital, we continue to collaborate with policy-makers and regulators to enable and empower inclusive ecosystems that support entrepreneurial growth and step-function transformation across the country. Today, Indians own 1.3 billion Aadhar accounts (unique identification for Indian citizens), 1.5 billion bank accounts, and 1.1 billion mobile connections. This has truly created an interconnected India, and a welcoming active base of customers for start-ups.

2021 was also a record year of exits, M&A, and IPOs showing that India can now support large-scale returns as private companies reach mainstream size. According to Preqin data, Indian start-ups raised $49bn over 1,540 deals in 2021. With $13bn returned by tech exits and $5.4bn raised by tech start-up IPOs over 2021, global allocators have more confidence to reinvest capital in India’s next cycle of tech.

Of course, as markets correct, India’s start-ups will have to demonstrate maturity in capital allocation. The combination of high governance and a focused path towards sustainability will serve as the fundamental substrate for the ecosystem this decade. If this happens, we may see a generational surge of Indian digital value creators realizing the long-standing promise of this ecosystem.

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Originally published in 2022 Alternatives in Asia-Pacific Report by Preqin