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The amount spent on acquiring start-ups in India hit a seven-year high this year. About $3.8 billion was spent to acquire 155 start-ups up to August this year, according to data from Tracxn. The number of acquisitions is also higher than last year’s — 155 start-ups have been acquired so far this year against 144 in the whole of 2020.
“There are multiple forces causing this trend,” said Sandeep Mishra, Vice-President, Research and Investments, Zephyr Peacock India, adding, “Large established companies like Tata, Reliance, etc. are looking at start-ups as a source of capturing the new digital economy, hence are acquiring start-ups. In addition, a significant sum of money has flown into start-ups post first-Covid wave. This has also spurred a phase of consolidation across the start-up ecosystem where larger, well-funded start-ups are increasing their market reach and dominance by acquiring smaller players.”
The jump in the number of acquisitions can also be observed in the US —1,889 start-ups have been acquired so far this year against 1,850 last year. However, the amount spent on acquisitions this year, in the US, is lower than that of last year —$121.5 billion in 2021 (till August 10) vis-a-vis $127.8 billion last year.
On the other hand, in China, both the number of acquisitions and the amount spent on acquisitions this year are lower than that of last year — only $3.7 billion was spent on acquiring 44 start-ups this year against $17 billion that was spent on the acquisition of 61 start-ups last year, according to Tracxn data.
Top acquisitions
Among the top acquired start-ups this year in India are BigBasket, Great Learning, PlaySimple, Simplilearn, SunSource Energy and 1mg, Tracxn data showed. Firms founded since 2010 have been considered for this analysis.
Anil Joshi, Managing Partner, Unicorn India Ventures, said legacy business groups have acknowledged the fast growth that new-age businesses are able to unlock.
“The agile and asset-light business model of these companies, which are deeply driven by tech innovation, is now beginning to catch the fancy of large companies which are at the forefront of acquiring start-ups. Most of the legacy businesses realised that they are losing business to new-age companies and felt this sharply during the pandemic, as online-first businesses just took off while legacy businesses were still evaluating their next steps,” Joshi said.
Start-up ecosystem
Commenting on what the landscape of the Indian start-up ecosystem looks like in the near future, Joshi added that there couldn’t be a better time to start up here because the entire ecosystem is showing signs of maturity, unicorns are emerging on a weekly basis and exits are being secured at high returns.
“As more start-ups get listed, investors exit either through primary or secondary routes; we will see all this money flowing back into the ecosystem leading to further growth and in some segments, consolidation will also lead the market trend. Overall, it is expected to be a vibrant and an active year for Indian start-ups,” Joshi said.
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