Investors continue to adopt a “cautious approach” regarding start-ups as investments declined to USD 1.363 billion in the third quarter of 2016, start-up tracker Xeler8 said.
According to data by Xeler8, a total of 288 start-ups have cumulatively raised USD 1.363 billion in the third quarter, compared to USD 1.5 billion (second quarter) and USD 1.7 billion in the first quarter.
“Following two consecutive quarters of decline, Q3 has also been hit with a cautious approach of investors…Deal activity had already gone down noticeably in second quarter 2016 (310) as compared to Q1 2016 (344). This quarter has again seen a decline of 5 per cent in deals to 295,” it added.
Only 71 deals were penned down in September as compared to 101 in August and 123 in July, totalling 295.
“It has been a slippery slope for start-ups in this quarter. However, the investment amount took interesting curves with USD 465 million in July, USD 693 million in August to only USD 204 million in September,” the report said.
The top funding deals include Hike (USD 175 million), Oyo Rooms (USD 123 million) and BookMyShow (USD 81.6 million), it said adding that top investors in the quarter included Sequoia Capital (13 deals), Accel Partners (11) and IAN and Kunal Shah (7 each).
With 65 merger and acquisition (M&A) deals, the said quarter saw an exponential increase in activity as compared to the previous quarters at 48 in preceding quarter and 40 deals in the first quarter of this year.
“This quarter witnessed a total of 10 in-bound M&As by major players, biggest being the acquisition of Hyderabad based Tuplejump by Apple. There have also been 7 outbound M&As this quarter with Redbus acquiring Peru-based Busportal and Golflan acquiring Dubai based StayPrime,” it said.
There was a 21 per cent decrease in early-stage deals in Q3 as compared to Q2. On the other hand, late stage deals have seen a 50 per cent increase as compared to Q2, the report said.
Delhi-NCR continued to hold the top position with the highest number of deals (98) constituting one-third of the total deal size, followed by Bengaluru with 80 deals.
For M&As too, Delhi-NCR remained the hotspot with 19 deals in its kitty.
E-commerce still remains the preferred industry for investors with 46 start-ups coming up with more substantial business models, followed by 26 SaaS–based startups, it said.
Healthcare and fintech sectors also bagged 22 deals each.
“The end of third quarter mirrors new hopes and aspirations in the start-up ecosystem. Although, the investment has gone down, more number of investors have turned up to place their bets. New avenues have opened for industry veterans,” the report said.
Although the investment trends doesn’t negate the future of start-up ecosystem, the increase in number of investors invariably indicates the keen optimism of investing ecosystem, it added.