There's plenty of money out there for those looking to start-up

For companies that wanted to raise money by selling their shares, 2021 was probably one of the best years. I have shared a number of IPO-related posts earlier and I myself have never seen a scenario like this. There are about 10 to 20 companies looking to list their shares on exchanges each month. If there is any doubt that there is ample liquidity in the markets, then there shouldn't be. Whether you are a budding entrepreneur with a new idea or someone who wants to unlock the value of your business by listing on an exchange, 2021 was a great year and 2022 may not be any different.

All in all, 60 plus companies raised money in India via exchange listing this year. The total sum raised was ~US$16 bn. The previous record was in 2017 and the total sum raised was just about 50% of the money raised this year. At the beginning of the pandemic, one would have thought that the next few years will be tough for financial markets but policymakers waved their magic wand of liquidity, and voila! 2020 was not that great as only 15 companies managed to raise about $3bn. However, the party will continue in 2022. I haven't hit a jackpot with any IPO lately but listings last week were a dud. Despite the below expectation listings, nearly 35 companies have a yes from India's securities regulator, SEBI, to raise ~$8bn and the same number of companies have requested SEBI for their nod of approval. They too are looking to raise the same amount of money cumulatively! 2022 hasn't begun but it already looks like it will be a record-breaking year. With Zomato, Nykaa, and Paytm giving exits to their VC/PE investors, one can expect more tech/tech-enabled companies to open doors for retail investors next year.

The above chart shows the money raised via IPOs and follow-on public offerings (FPOs) in the last 10 years. Companies raising money through FPOs have enjoyed a lot since the pandemic started.

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Liquidity conditions have been kind to startups as well. Indian startups have beaten established businesses by raising a whopping $36 bn this year! Last year the figure was $11bn.

Source

As one can see, not only are more companies able to raise money but the amount on the cheque has also gone up for Indian startups. While the number of deals has been higher, as expected, for seed and Series A fundings, actual money has gone into pre-IPO rounds. The IPO scenario discussed above has truly helped. With investors now seeing an exit potential, they are willing to put more money to work to find an exit quickly. Such activity also pushes valuation higher and hence, more money deployed. More investors want to buy into such companies knowing that there are higher chances of an exit. The charts below, help highlight the point that I am making -

More cheques written -

More profitable exits -

More funds available with investors -

I expect the party to continue next year as well. In fact, 2021 will make investors and startups even more excited about the year to come. If you want to raise money, the time may be now. Just make sure your pitch has nothing wrong with it.