Venture capital firms raise $2.3b for India as tech investing recovers

BENGALURU: Venture capital (VC) firms raised $ 2.3 billion for investments in India as of September this year, according to a study by Bain & Company and the Indian Private Equity and Venture Capital Association (

IVCA

).

This signals that India tech investments were in recovery mode after

VCs

had raised barely $1 billion in 2017. VCs had allocated a peak $2.8 billion in 2016.

About 22 domestic and foreign VCs raised capital for the India investments this year as against 19 in 2017.
Frontline VC firms like

Sequoia Capital

,

Matrix Partners

, and

Nexus Venture Partners

among others were credited for majority of the fresh dry powder in 2018

The study mentioned that VCs are now going for fewer quality deals instead of the earlier practice of backing several startups with relatively smaller cheque size. For instance, VCs made about 400 deals as of September compared to 515 and 746 in 2017 and 2016 respectively. This has changed the average size of investments as well. Average investment size went up to around $9-10 million this year as against close to $ 4 million in 2016.

“The Indian VC industry is maturing and you are finding proof of funds going after fewer but better quality deals after building their initial portfolio,” said Arpan Sheth, partner, Bain & Company. Majority of these investments are still happening in the consumer technology space but the study notes that investors are diversifying their bets within the vertical.

SaaS, consumer retail, banking & finance are some of the areas seeing investment bets form these funds. Areas like beauty, sports, toys and auto parts are being seen as emerging avenue of investments in the consumer technology segment. While exits for investors continue to remain a challenging task in India, 80% of founders expect to offer exits to their investors by 2024.

"The data and statistics point in one direction that these are best times for on-shoring the offshore pools of capital in India beacuse of the maturing startup ecosystem, increasing exits and regulatory support by the government," added Sanjay Nath, co-chair, VC council & EC member at IVCA. Nath is also a managing partner at early-stage VC firm Blume Ventures.