Indian UHNIs expected to invest US$ 30 billion in Indian Tech startups by 2025

UNHI Investment

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·       India to have 150 Unicorns by 2025, growing 3 times by 2025

·       Venture Capital & Private Equity constitute 20% of Indian Family investments

·       VC/PE investments contribute to 30% of overall returns in Indian Family investments

Mumbai, June 18, 2021 – According to a newly launched report titled, “Turning Ideas to Gold,” jointly prepared by 256 Network and Praxis Global Alliance, India expects to add 95 new tech unicorns to its 56-strong unicorn pool by 2025. The report forecasts that Indian UHNIs will have invested up to the US $ 30 billion in tech startups in India by 2025, reiterating the growing investment opportunity for home-grown tech ventures. This report offers Indian Family Offices a detailed perspective on how VC/PE investments can help unlock high returns, especially in the emerging context of increasing digitization and the growing need for tech interventions across sectors.

The “Turning Ideas to Gold” Report also says India is expected to have approximately 10K UHNIs, which will include business leaders, celebrities, NRIs, and digital entrepreneurs with a cumulative wealth of US$ 700 billion by 2024. Family offices are being set up as full-service private wealth management services to cater to one, or a small clutch of these ultra-high-net-worth individuals. Currently, India has about 140+ family offices catering to Indian UHNIs and heavily investing in the Indian startup space. They have been pro-actively involved in 50+ such deals every year since 2015.

Speaking about the opportunity for Indian Family Offices investing in technology companies, Kris Gopalakrishnan, the co-founder of Infosys and promoter of Pratithi Family Office, said, “Investments in innovative startups have emerged as a lucrative alternate asset class when compared to traditional investments like equity, debt, commodities, and real estate. However, it is difficult to get exposure to high-growth portfolios that use innovations to solve real challenges and build large companies in a relatively short period of time. Backing such companies requires deep expertise, strong networks, patience, and sufficient capital. Funds run by professionals provide that opportunity to Indian Family Offices and UHNIs.”

Dhruv Sehra, Founder, 256 Network, added, “While the exact size of underinvestment of Rupee Capital varies, our conversations with Indian Family Offices within the 256 Network highlighted that over 2/3rds of this peer group still wait and watch when it comes to investing in VCs. Preferring to keep their portfolios wedded to conventional asset classes like stocks, real estate, and gold, many Family Offices do not benefit from the healthy returns generated by VC investments. This is because the risk-reward

payoff for such investments is not well structured for potential investors. 256 Network aims to bridge this gap through this report.”

While talking about the impact of Covid19 on startups, Sunil Kant Munjal, the Chairman of Hero Enterprises, said, “The pandemic has seen the rise of a new entrepreneurial class that is savvier.

Several startups are launching India-specific solutions while repeat founders are targeting bolder issues. Many are unlocking value through private markets and I am heartened to see multi-generational entrepreneurs viewing this space as a vehicle to create wealth. This report by 256 Network showcases the many ways in which venture capital is emerging as an important asset class on its own and provides a useful framework for India’s long-lasting entrepreneurial families in generating optimal returns.”

Madhur Singhal, Managing Partner and CEO, Praxis Global Alliance, said, “Private wealth in India is burgeoning and UHNIs are increasingly turning to venture capital and the private equity ecosystem as an asset class. Incumbents, digital entrepreneurs, celebrities, and NRIs are setting up family offices and investing in the Indian startup ecosystem which has generated 14 new unicorns in 2021 so far.

These family offices are providing businesses with patient capital and we are closely following the role that these family offices play in the Indian startup ecosystem.”

Some of the key findings of the “Turning Ideas to Gold” report are:

  • Approximately 190 Soonicorns are expected to become Unicorns by 2025. Currently India has 56 Unicorns, of which 14 were added in the year 2021 already.
  • ‘Digital first’ solution providers are establishing India as a deep-tech hub. India currently has over 950 AI startups, more than 480 IOT startups, more than 80 AR/VR startups and 30+ Robotics startups
  • Indian Tech enabled businesses have beaten traditional businesses in Covid times. The biggest gainers during the pandemic have been EdTech, online gaming, e-groceries and Health-Tech companies
  • Tech solution providers are digitally upskilling millions of employees and bringing them within the paradigm of a connected ecosystem
    • Delivery fleet Zomato and Swiggy employ over 300K-500K delivery executives between them
    • OlaCabs is generating livelihoods for 1.5M drivers across 250 cities
    • Meesho has enabled 10 million entrepreneurs, mostly women, to create their own professional identity and grow their businesses
  • More than 55K Indian start-ups raised over US$ 70 Bn in funding between 2014-20
  • VC/PE Funds raised during periods of economic crisis tend to have better returns when compared to those raised in non-crisis period.
  • Total market capitalization of public tech companies is 12.6% of India’s GDP, while the valuation of private tech companies is 10.2% of India’s GDP
  • 250+ private Indian tech companies have valuations above $100M and a potential to go public in India
  • India’s tech story can mirror the US with the right capital infusion to support tech disruption
  • Typical 7-Year Portfolio Performance: 20% portfolio allocation towards Alternatives (incl. VC) yields 30% of total portfolio returns
  • Globally, private market investments have generated 500 bps higher returns relative to public markets
  • Top Quartile Cat 1 AIF (INR Funds) have an IRR of 18.19 % Against BSE IT returns of 13.7% and BSE tech returns of 10.10%
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India’s Tech Opportunity for Investors

The opportunity to leverage India’s technology sector growth remains firmly in the private market. 250+ private Indian tech companies with valuations above $100M have the potential to go public in medium term. The size of the private tech market and the public tech market is closing in and the private tech market is expected to outperform the public tech market soon. The total market cap of public tech companies as a percentage of India’s GDP is 12.6% while the valuation of private tech companies is 10.2%. India’s tech story can mirror the US with the right capital infusion to support tech disruption.

For the new Indian UHNIs, venture capital holds huge promise as an asset-class, generating superior financial returns even during crisis times. Family offices have just started realizing this potential as VC/PE as asset class make around 20% of their portfolio allocation but contribute to 30% of their portfolio returns. Hence, Indian family businesses have the potential to make India’s startup landscape blossom and build a strong community together.