The highest number of secondary deals were carried out in the fintech sector last year, continuing similar trends from 2022, according to a report by market intelligence platform Private Circle. For comparison, in 2021, the e-commerce sector had dominated this category of deals.
A secondary round takes place when an existing shareholder sells their shares to a third-party. “Fintech emerged as the dominant sector in 2022 and 2023 secondary deals, showing the sector’s ability to provide investor exits,” the report said.
Besides fintech, agri-tech and software-as-a-service sectors also saw a high volume of secondary deals in 2023. The report analysed 117 companies valued at $500 million or above in the last three years.
Among such deals, 2023 only recorded 13 secondary rounds, while the number was as high as 139 in 2021. Secondary deals saw a similar slump in volume and deal size like the primary rounds, the report noted.
Primary deal volume dropped 72% year-on-year to 1,444 deals in 2023, where as the total equity raised was Rs 66,908 crore, compared to Rs 2.4 trillion raised at the peak of the funding boom in 2021.
Even amid the slowdown, Lenskart, DMI Finance, PhonePe, and Udaan were able to raise significant capital. “In the top 10 deals this year, if we look at the companies that have been able to raise these mega rounds, they are all doing well in terms of revenue. Most of these companies have revenues over Rs 500 crore,” the report noted.
Despite the funding slowdown, venture capital funds are sitting on ample dry powder. Given that the cautious approach of investors has now continued for almost two years, and that they usually have a 10 year cycle for investments, the research firm expect to see VC activity pick up pace later this year.