The year 2011 saw a record jump in venture capital deal volumes and the outlook for 2012 also looks bright. One of the leading venture capitalists, Canaan India’s managing director Alok Mittal , says he is confident that 2012 is going to be a good year for the VC industry.
“The choppy markets ensured that 2011 turned out to be a disappointment for companies looking to go public. India doesn’t have a mergers and acquisitions story yet in the start-up space and the IPO is the only real exit option that exists. If the markets start to settle down, we should see some very interesting companies listing this year. A big factor to watch out in 2012 will be the exits that the venture industry can deliver,” Mittal said.
Sarath Naru, managing director, VentureEast, one of the oldest venture capital firm, said, “2012 is going to be a year of consolidation and introspection. The year will also establish the true level of passion and test nerves of the fund managers. 2012 will also see big funds enable smaller funds to exit their investee companies as more and more strategic investors are looking at India for better valuation.”
Says GV Ravishankar of Sequoia Capital, ? I am expecting a year of better valuation and better returns for VCs. The exit route for VCs will improve as one would see coming out of more IPOs. More VCs expect to take advantage of the emerging trend of the buoyant Indian economy.”
MK Sinha of IDFC PE said, “Expect a high degree of valuation and the current environment will be an opportunity for investors to take advantage of the situation. It also throws good value to acquire assets. One would see the availability of lot of assets for acquisition and more investments.
According to Mittal, “Venture capital as an asset class should gain more prominence in India. We have been seeing both increasing awareness and interest about the Indian start-up ecosystem amongst limited partners (LPs). The India internet story has really started to take off now. E-commerce seems to have found its feet in India last year and more people than ever before are comfortable buying online. We are seeing favorable dynamics in other sectors such as technology-enabled services and mobile businesses. These trends are creating an incredible number of business opportunities and naturally, enhancing the interest levels of LPs.”
The year 2012 could also be the year when the government puts its weight behind the economic opportunities being created by venture-backed entrepreneurs. ?The number of angel funds being raised bodes well for the start-up ecosystem. It allows entrepreneurs to gain access to smaller amounts of money at a time in their company’s life when they may not have the traction or valuation to be attractive to larger venture capital funds. The second benefit to start-ups is that this money allows them to scale and ensures far better terms for them when they do go in for their first round of venture funding. ? Mittal added.