Emerging IPOs: Agritech and SaaS Startups from Tier-II Cities to Lead India’s Next IPO Wave, Says VC Expert Apoorva Ranjan Sharma

India, known for having the third-largest startup ecosystem globally, is set to see a wave of initial public offerings (IPOs) from companies in smaller cities and specialised sectors. Venture capital (VC) investor Apoorva Ranjan Sharma shared this insight with Mint, highlighting a shift from the typical big-city startups to those emerging from tier-II cities and beyond.

Exploring New Investment Avenues

Sharma is considering setting up a secondary investment fund to tap into opportunities in late-stage and pre-IPO companies. This reflects the growing interest in such investments. “We see a lot of demand for secondary investments now,” he said.

Nurturing Underrated Startups

Sharma, who co-founded VC funds like Venture Catalysts and 100Unicorns, focuses on supporting startups in smaller towns like Ambala and Silvassa. These startups often go unnoticed due to a lack of resources and awareness. His funds aim to mentor these companies until they reach a valuation of $100 million.

Beyond Big Cities

While most well-known startups come from major cities, Sharma believes there’s a significant opportunity in smaller towns where founders need more help to grow. He expects the next unicorns (companies valued at over $1 billion) to emerge from diverse sub-sectors, driving India’s goal of becoming a $7 trillion economy by 2030.

Target Sectors for Growth

To support this growth, Sharma’s funds like Spyre and Beams Fintech focus on specific sectors. He predicts that areas like fintech, software-as-a-service (SaaS), and property technology (prop-tech) will be major growth drivers. Sharma has also backed funds like Elev8 Venture Partners, which invest in technology-driven growth-stage companies.

Examples of Successful Startups

Sharma’s portfolio includes companies like DrinkPrime, a water purification startup, and Wiom, an internet company with a unique customer base. Wiom has a higher concentration of users in rural areas compared to mainstream providers like Jio and Airtel. “These kinds of companies will drive future innovation in semi-urban and rural areas,” Sharma noted.

New Investment Funds and Global Expansion

In May, 100Unicorns launched a second accelerator fund with a $200 million target to invest in early-stage startups. This fund plans to invest in around 200 startups across sectors like SaaS, fintech, electric vehicles, defence, and agritech. The fund also aims to expand to markets in the Middle East, North America, and South Asia.

The Path to IPOs

Sharma believes the next few years will transform India’s startup scene as many startups mature and go public. Despite investor concerns about liquidity, he sees “immense opportunity for good investments and returns,” with multiple exit options like IPOs and acquisitions.

Consumer Tech and Acquisitions

Sectors like consumer tech and direct-to-consumer (D2C) are attracting acquisition interest, making them appealing to investors. Major consumer companies, like Marico, have acquired several startups in recent years to stay competitive.

Improved Exit Options

India’s exit routes for investors have improved, with more opportunities for secondary transactions. Recent large secondary deals include Temasek and Fidelity’s $200 million investment in eyewear retailer Lenskart, and a ₹1,000 crore investment in beauty retailer Purplle by the Abu Dhabi Investment Authority.

Growing Trends in Exits

According to Bain’s India Venture Capital report, exits through secondary and strategic sales have increased, driven by major consumer tech companies like Flipkart and Lenskart. As investors seek liquidity in a high-interest-rate environment, exits surged to $6.6 billion in 2023.