Consumer technology, software as a service (SaaS) and fintech emerged as the hotbeds for the most active funding activities in the Indian start-up ecosystem, accounting for nearly three-quarters of the entire venture capital funds the pandemic hit year. In 2020, venture capitalists injected funds to the tune of $7 billion into these three sectors, while the total private equity investments stood at $10 billion. Both consumer technology and SaaS have seen spikes in total investment through prominent VC backed transactions over the last year.
There is, however, a significant funding gap between the MSME industry and official financial institutions backing “big” start-ups. This gap needs to be filled by measuring and boosting senior investors’ confidence through modes like tech MSME and start-ups loans, among many others ways. This can open up opportunities for new players and small businesses in the consumer technology market which is pegged to become a $1 trillion opportunity by 2023.
Consumer technology companies are snowballing in many areas, expanding their revenue streams through a range of customer-centric financial products.
Consumer Technology and its Subsidiaries Skyrocketed in Raising Funds
The adoption of core technologies in mainstream consumer segments, including food technology (food tech), education technology (edtech), and online gaming and esports, is expected to attract most investors’ interest well into the future. In fact, the total value of educational technology and food technology sectors in India doubled in 2020.
Along with edtech, the food and beverage technology industry emerged as winners in 2020 due to increased demand from local consumers, which led to more significant investment. In this field, with the help of ten new investors, online food aggregator and delivery giant Zomato raised $600 million in funds at a post-money valuation of $3.9 billion. In comparison, rival Swiggy raked in about $156 million in two rounds.
Growth of Consumer Technology-oriented Entrepreneurs
The efficacy with which COVID-19 accelerated the adoption of digital platforms by consumers is not surprising. Businesses and start-ups began the online shift years before the pandemic hit, and investors have shown tremendous confidence in consumer technology and other tech-based entrepreneurs’ ideas, as can be seen in the case of PayTM, Swiggy, Zomato and many others.
According to Counterpoint Research, India had 570 million active Internet users by the end of 2020, compared to 480 million in 2019. As more consumers reach the Internet, companies are being encouraged to reduce consumer technology acquisition and implementation costs. An approximated 65-70% of the investors who had placed their wagers on the consumer technology sector in 2019 reinvested in 2020. Separately, B2B tech firms raised close to a billion dollars in 2020 compared with $3.56 billion in 2019.
Start-Ups Reached Out to More People
Consumer technology companies are also snowballing in other areas, expanding their revenue streams, such as PhonePe, which launched a range of customer-centric financial products. Meanwhile, news company Daily Hunt recently released a short video platform called Josh. There is a boundary in terms of how much start-ups can grow, and many a time, unfastening more markets provides a better return on capital invested.
In 2020 and 2021, many start-up entrepreneurs are beginning to focus on the online consumer market, while traditional companies continue to divulge from this crucial segment. For example, the lockdown in 2020 coincided with the top sowing months hitting regular processes. And agtech businesses assisted farmers in signing up for agri-tech services in huge numbers.
Moreover, in consumer technology , travel and hospitality firms are also assumed to witness a steady improvement in the coming years. At the same time, companies are likely to concentrate on deep tech to pull investments. In a nutshell, 2021 is a promising year for the consumer tech space, and it is set to see some considerable fund consolidation.