Consumer internet sector raised $15.4 billion PE/VC capital in 2022

EY, the leading professional services organization, today announced its latest edition of the e-commerce and consumer internet sector trendbook, in collaboration with IVCA (Indian Private Equity and Venture Capital Association) and PeerCapital. The report was launched on the sidelines of the IVCA Conclave 2023.

The report highlights investments, financing stage, M&A and market consolidation and the outlook for over 14 subsectors within the e-commerce and consumer internet sector. The internet and e-commerce sector in India has emerged as one of the fastest-growing sectors in the country, with growth further accelerated by the shift in consumer behaviour post-pandemic.

KT Chandy, Partner, EY Private, said “E-commerce and consumer internet sector in India has been on a growth spree in the last few years, emerging as the second largest online shopper base globally. The growth momentum is expected to continue, driven by improved digital infrastructure, rise in customer base and robust government initiatives. Going forward into 2023, businesses are expected to embrace innovative methods of customer acquisition, while focusing on cash creation and profitability. ”

Surabhi Marwah, Partner, EY Private, “The year 2023 is going to see an increased focus on Tier 2 and 3 cities to drive the exponential growth of internet businesses. Channels such as social commerce have helped brands build a trusted and loyal customer base in these important markets that will further propel the growth trajectory of the Indian e-commerce and consumer internet sectors. Through our annual report series, we aim to catalyse India’s positioning as one of the fastest-growing e-commerce markets worldwide.”

Ankur Pahwa, Managing Partner, PeerCapital, said “In 2022, Indian e-commerce and consumer internet companies raised $15.4b in PE/VC funding, doubled from $8.2b in 2020. The “funding winter” can be likened to a tale of two cities, as $12.6b of this deployment was invested in H1 2022, slowing down to $2.8b in H2 2022. Early-stage companies saw sustained funding momentum in 2022, accounting for 17% of the PE/VC funding raised by companies in the sector as compared to 6% in 2021, and are likely to continue this promising path. As the financial stack goes global and our health stack expands by the day, India’s future holds massive innovation in supply chain digitisation, influencer-led social commerce, synchronization of healthcare data, and tech infusion in agriculture and clean energy. We are confident that the e-commerce and consumer internet sector is going to be the largest value-creator, employer, and contributor to India’s GDP and a catalyst to the ambitious vision of India@100!”

What’s next:

Tech intervention in traditional supply chains, agriculture and energy

• Evolving domestic exports and payments infrastructure, as well as government incentives such as PLI schemes, will speed up supply chain digitisation
• From AI-backed sowing patterns and pest protection to interoperability in clean energy, tech-based solutions will transform high-impact sectors

Tier 2 and 3 cities driving exponential growth in consumer internet businesses

• Influencer-led commerce will emerge as a strong channel for customer acquisition and loyalty-building in these markets
• Increasing per capita GDP and micropayments as well as young consumers’ demand for entertainment will translate to increased monetization in gaming

Globalised UPI payments, digitized health records and gamified products create tremendous value for consumers

• India’s payment stack expanding beyond borders will be a force multiplier for the Indian fintech industry to innovate and build for the world
• The national health stack will unlock opportunities across patient, provider and payor, thereby transforming precision care and distribution
• Gamification in products, across sectors, will emerge as a strong lever for customer engagement and retention

CT Bureau