India is attracting top dollars from global and local Venture Capital (VC) funds, with total raised this year touching $2.3 billion, up until September 30, as against $900 million in whole of 2017.
Consumer technology sector has attracted the maximum funding by VCs in India, followed by IT, consumer/retail, BFSI and healthcare.
The average ticket size of investments in consumer technology was about $7 million, while it was in the region of $5.5-7 million for other sectors, according to a latest report by Consultancy firm Bain & Company and Indian Private Equity and Venture Capital Association (IVCA).
The top start-ups which received top dollars from VCs and PE funds in the consumer technology sector in the recent months include ByJu’s, UnAcademy and Toppr (education tech), Portea and CureFit (Health tech), Swiggy, FoodPanda and Zomato (Food tech), PayTM, Freecharge and PolicyBazar (FinTech) and Ixigo, Yatra and Oyo (OTAs – online travel aggregators).
2017 saw a dip in funds raised by VCs for investments in India mainly on account of availability of surplus funds raised in 2016, following a 40 percent drop in investments in that year. Besides, most of the funds raised last year were by smaller, Seed/Series A focused Funds, leading to lower quantum of funds raised per VCs.
According to the report, India has emerged as the second most attractive investment destination for VC and PE funds in APAC region, with 28 percent of fund managers at LP (Limited Partners) funds terming it as attractive for venture opportunities, ahead of South East Asia, South Korea, Japan and Australia.
China is top of the list, with 30 percent fund managers preferring it in terms of funding opportunities.
“VCs and Limited Partners are attracted to the Indian market because of the huge market potential for scaling up of start-ups and the sheer volume of consumer demand that the country generates,” M R Rajaram, a leading financial consultant and former Finance Director of ICI India, told Arabian Business.
Added to this is the track record of a series of exits by VC and PE funds over last year and this year, raking in huge returns on their investments in some of the start-up companies.
Enabling government policies, availability of high quality tech talent pool and highly conducive ecosystem are the other factors which are propelling big ticket VC and private equity funding to Indian start-ups, the report said.
Venture Capital investment in India is currently witnessing a ‘maturing phase’ with VCs are more focused on placing on placing select bets on fewer investments – given their initial portfolios are already in place.
In line with this trend, the number of deal rounds has come down to about 100 in seed funding and about 20-30 in Series C and Series B funding in the last two years, from 350-400 deal rounds in seed finding and 30-80 in Series C and B funding in the earlier years, the report said.
The quantum of funding in each round, however, has gone up to an average ticket size of $25 million in series C to $2-3 million at seed funding rounds.
The report, however, has revealed that after registering a sharp increase year after after starting from 2013, the number of VCs with active investments in India seemed to have plateaued of late, with the total number remaining at 270-275 level in the last two years.
Another trend evident of late is the big time entry of corporate VCs in the investment arena. Besides Flipkart and PayTM, more and more Indian mature start-ups are expected to float VCs to fund both early and late stage start-ups across various sectors in India.
Alongside, global Corporate VCs such as Google Ventures and Intel have also increased their direct investmens in India. Google made its first direct investment in India in Dunzo in 2017 and second investment in Fynd this year.
Going forward, start-ups in media and content, toys and auto parts, apparel and accessories and sports equipment are among the sectors which are likely to see highest traction among VCs for investments, the report said.
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