The fundraising momentum this year saw a steep rise to $2.3 billion raised by VCs across 22 funds from just $0.9 billion raised across 19 funds in 2017.
Venture capital (VC) investors in India have poured $3.5-4 billion till September 2018, up from $3.4 billion in 2017, according to a recent report by Bain & Company and IVCA. The investments have been across 400 deals compared with 515 deals in 2017. Sectors such as consumer technology, IT, consumer/retail, BFSI, and healthcare led the investment activity.
The amount invested this year is the highest after 2015, in which $4.3 billion was invested through 855 deals in Indian startups.
“In 2015 the fund managers were excited about the opportunity. But after that, they wanted to look at how the companies would perform and so the funding went down. Now it is the stage of maturing and getting predictable about investments and the value out of it,” Rajat Tandon, President, IVCA told FE Online.
The average deal size also increased to $8.7-10 million this year from $3.8 million in 2016 and $6.6 million in 2017, showed the report titled Perspectives on Indian VC Ecosystem 2018.
“Overall deal volume has gone down as the focus is shifting to high-quality deals with higher deal value. This is the trend of a maturing industry,” said Tandon.
The fundraising momentum this year also saw a steep rise to $2.3 billion raised across 22 funds from just $0.9 billion raised across 19 funds in 2017. Sequoia Capital led the fundraising activity from its limited partners, followed by Nexus Venture Partners, Matrix Partners, Lightbox, Lightspeed Venture Partners, and Samaa Capital till September 2018, the report said.
However, the number of VCs with active investments almost plateaued to 270 this year against 273 in 2017 and 286 in 2016.
The Indian startup ecosystem saw $19.6 billion worth of exits in the current year through 155 deals, almost 5X increase from $4.2 billion in exits from 96 deals in 2017. However, the $16 billion Walmart-Flipkart deal contributed around 80% to the exits this year.
“Big exits like Flipkart has raised the confidence of the investors who will invest in markets where they get returns from. So there are healthy exits happening,” Tandon added.
The report also noted that secondary/strategic deals remained the preferred mode for exits. This has been driven by the higher number of exits from deals in the consumer technology space. “Once the profitability starts coming and as businesses move towards IPO, the number of such exits will go down,” he noted.