This is The TechCrunch Exchange, a newsletter distributed on Saturdays, stemming from the column of the same title. You can subscribe to receive the newsletter via email here.

During Y Combinator’s two-day demonstration event in August, TechCrunch highlighted several Indian startups that particularly impressed. Companies such as Bikayi (providing e-commerce solutions), Decentro (offering consumer banking APIs), Farmako Healthcare (developing digital health records), and MedPiper Technologies (facilitating the recruitment of healthcare professionals) were among those we favored from the cohort.

The significant presence of India-based startups within the group wasn’t accidental. Statistics demonstrate a substantial increase in India’s venture capital activity in recent years. Specifically, 2019 represented the nation’s most substantial year ever for venture capital investment, with Bain reporting $10 billion invested throughout the year.

Following a somewhat slower start in 2020, India’s venture capital landscape rebounded strongly in the third quarter. After experiencing a decline to $1.5 billion in Q2 – the lowest quarterly total since 2016 – Indian startups witnessed a resurgence in venture capital funding. Data from KPMG and PitchBook confirms that $3.6 billion was invested in Indian startups during those three months.

While this amount didn’t establish a new record, the Q3 total appears to be the fourth-largest VC quarter in India’s startup history since 2013, and potentially ever. Nevertheless, it marked a notable recovery amidst the challenges of a global pandemic. The number of VC deals in the country also increased somewhat in the third quarter, with substantial investments like the $500 million funding round for Byju’s in September.

Emerging startups are also achieving considerable success. Bikayi serves as a prime example. TechCrunch connected with the company through email to learn more about its progress following Demo Day. The company reported a 60% increase in monthly recurring revenue (MRR) in August compared to July. Furthermore, Bikayi indicated in late August that it was projected to reach $1 million in annual recurring revenue (ARR) by year-end.

Bikayi recently announced a doubling of the number of merchants it supports, alongside a 100% increase in revenue during September. This WhatsApp-centered, Shopify-like platform for India is experiencing rapid growth. Bikayi CEO Sonakshi Nathani also noted that October’s results appear “encouraging.”

To gain a more comprehensive understanding of the Indian startup ecosystem, The Exchange consulted with Accel investors Arun Mathew (located in the United States) and Prayank Swaroop (based in India) for their insights.

According to Swaroop, the recent surge in Indian startups can be attributed to historically decreasing bandwidth and smartphone costs, coupled with improvements in Internet reliability. Mathew added that the achievements of prominent companies like Flipkart have made startups a more appealing career path, shifting the conversation surrounding the establishment of tech businesses in recent years.

Swaroop also pointed out that the emergence of experienced professionals from established Indian tech companies who are now launching their own ventures is a significant factor. This process of leveraging existing knowledge to create new, smaller companies mirrors a key element of Silicon Valley’s success, where a concentration of experienced startup builders drives innovation. Moreover, increased funding is available to support these new Indian tech companies.

Overall, 2019 was a landmark year for the Indian startup market in terms of venture capital, and 2020’s recovery is well underway. It will be interesting to observe the future developments and innovations that emerge.

Market Notes

This week, The Exchange team dedicated significant time to analyzing venture capital data and identifying emerging trends – a subject we consistently find compelling. For those needing a refresher, you can review our analysis of the U.S. venture capital landscape in the third quarter, as well as our overview of the broader global venture capital environment. We previously discussed developments in India as well. But what else has been happening?

Further data concerning companies specializing in healthcare provides valuable insight. According to a recent report from CB Insights, there are currently 41 healthcare-focused unicorn companies. Notably, startups concentrating on health-related areas – including telemedicine, mental health services, and artificial intelligence – experienced a record-breaking quarter. Despite the ongoing pandemic, $21.8 billion in funding was invested across 1,539 investment rounds globally during the third quarter. This level of activity exceeded my expectations.

• In other news, The Exchange assembled a report detailing the growth rates of several dozen startups in Q3, which proved to be a particularly interesting exercise.
• The Equity team also reported on numerous startup funding rounds in the media and housing sectors, should those areas be of interest. The coverage also included some humorous commentary.
• Datto’s initial public offering this week provided the market with a valuation benchmark for established, profitable software companies based on revenue multiples. The results were largely positive.
• Regarding insurtech, New Front announced a $100 million funding round, most recently valuing the company at $500 million. We also highlighted in our growth-rate analysis that Next Insurance secured $250 million in funding last month, which initially went unnoticed. Additionally, Clearcover, a Chicago-based company, released news this week, which is relevant considering the upcoming IPO of Root Insurance (valuation details can be found here). Both companies focus on providing insurance for drivers.

With that, we are concluding Market Notes this week to make way for some important news from TechCrunch:

Hello everyone. This is Megan Rose Dickey briefly taking over Alex’s newsletter to share a couple of quick updates. First, I am pleased to announce the launch of my newsletter, Human Capital! It focuses on labor issues, as well as diversity and inclusion within the technology sector. I have also relaunched the Mixtape podcast with my colleague Henry Pickavet. You can listen to the first episode of Season 3, which discusses California’s gig worker ballot measure Prop 22, here.

Megan’s work is exceptional, and I encourage you to explore her podcast and newsletter.

Various and Sundry

There’s consistently a wealth of interesting information to share, exceeding available space, so let's move directly to the data, insights, resources, and other noteworthy items.

• Research compiled by a group concentrating on the Midwest suggests venture capitalists should increase their attention on the central United States. The reasoning? Lower construction costs, alongside reduced startup expenses, translate to greater returns on investment for funders. Moreover, multiple on invested capital (MOIC) figures appear robust in Chicago.
• Widespread feelings of exhaustion are prevalent.
• Both Netflix and Intel experienced negative reactions following their earnings reports, which did not meet investor expectations, potentially foreshadowing a trend as numerous companies prepare to release their earnings next week.
• The surge in Special Purpose Acquisition Companies (SPACs) has proven to be as unconventional as anticipated.
• Despite substantial funding available for later-stage companies, early-stage financings now represent a diminishing portion of overall venture capital investment.
• What areas are attracting the attention of the newest generation of venture capitalists? A survey of Gen Z VCs reveals their primary interests lie in the creator economy, educational technology, and social gaming.
• An examination of Yext’s journey from its origins to becoming a publicly traded company, and its subsequent development.

In summary, a Salesforce study indicates that CEOs of enterprise cloud businesses are reporting stronger revenue growth and reduced customer attrition than initially projected in March. This likely explains why earnings season hasn’t been as negative as feared, and why so many unicorn companies successfully went public during the third quarter.

Furthermore, public market valuations are currently exceeding those offered by private investors, a reversal of the trend observed in recent years.

See you Monday,

Alex