Early Q3 indications show India’s startup ecosystem is going gangbusters

Though it appears to lag key rival China -- for now

Ola Electric announced this morning that it closed a $200 million round at a $3 billion valuation. The EV company’s parent, Ola, is best known as an Indian ride-hailing platform. Ola itself has raised more than $4.5 billion to date, per Crunchbase data, while Ola Electric is now over the $500 million fundraising mark, if we’re doing our morning sums correctly.

That none of those numbers really surprised you is indicative of how active the Indian startup ecosystem has become. It seems that every day TechCrunch covers yet another new unicorn from the country, or at least a tidy nine-figure round as a consolation prize.

The Exchange explores startups, markets and money.

Read it every morning on Extra Crunch or get The Exchange newsletter every Saturday.

I was curious about what early third-quarter data could tell us about India’s recent venture capital results. I’m also interested in whether all the noise coming from the country’s startup market was adding up to anything. So we’re doing a little bit of a data dive.

We’ll examine historical data from India, and then do some quick and dirty data pulls to get a handle on where the country is heading as Q3 comes to a close. And for comparison’s sake, we’ll loop in both historical and present data from the Chinese startup market to see how India stacks up.

Venture capital in India

When The Exchange examined Q2 2021 data from the global venture capital market, we leaned on CB Insights’ second-quarter data to a large degree. That data set indicated that Indian startups raised $6.3 billion, a quarterly record.

Today, we ran India-focused queries in PitchBook, keeping the data set constrained to venture-backed companies with their HQ in the country. We pulled both Q2 and Q3 numbers for this year, though, of course, the Q3 number is not quite finished; there are a few hours left.

The PitchBook query for Q2 Indian startup fundraising activity came in a little bit above ($6.81 billion) where CB Insights pegged the data. That PitchBook has a larger number for India’s Q2 a few months after CB Insights closed the books on its Q2 report is not surprising. Venture capital data is laggy, and quarters tend to fill in over time.

Regardless, with both $6.3 billion and $6.8 billion numbers for Indian venture capital fundraising in Q2, we have a good base to compare against for Q3. Which, per PitchBook data, includes more rounds and far more capital. Indeed, Indian startups have raised $17.23 billion, PitchBook reports, across some 459 deals in the third quarter.

Those numbers will wiggle around as PitchBook adds in what’s left in the quarter and cleans up the data. But regardless of whether we prefer the $6.3 billion or the $6.8 billion Q2 number, it appears that India’s startups utterly crushed previous venture records in the third quarter.

What does that tell us? That India is precisely as bonkers-busy as we thought. And that it’s coming for China.

So, what about China?

In August, The Exchange took a very, very early look at the Chinese venture capital market, hoping to find a little signal in the data. Instead, it appeared that Chinese startups were still raising lots of capital despite a shifting regulatory, economic and social climate. Good news for Chinese startups, for sure, but not what we expected at the time!

A re-check of PitchBook data for China this morning backs up that early look, albeit with more recent information. After banking a little bit over $21 billion in Q2, Chinese startups are set to land around $25 billion in Q3, according to PitchBook. Those numbers are middling for the country’s recent quarterly results, once again leaning on the CB Insights Q2 report for historical figures.

The trendlines appear clear: China’s venture capital totals are down from prior highs set in Q4 2020. Indian venture activity, in contrast, is racing higher and higher with each passing quarter. One more great quarter from India and a modest decline in China could see the former dethrone the latter for second place in the global startup market fundraising ranks.

Now that would be a turnaround from the 2018 sentiment that China was about to eat the United States and the larger global venture ecosystem’s collective lunch.