Angel funding into start-ups dropped 53% in H1CY17; fall attributed to tax-related issues.
By Sameer Bakshi
Start-ups in India may be coming up at the fastest pace anywhere in the world but they’re going down equally fast. Nasscom on Thursday pegged the mortality rate for the country’s start-up ecosystem, believed to be the third largest in the world, at 35%. The high death rate was attributed by the IT lobby body to the relative lack of angel funding, resulting from tax-related issues. Angel funding into start-ups dropped 53% in H1CY17, the Nasscom Start-up Report said. In contrast, the total funding (venture capital plus angel) grew 167% to $6.4 billion in H1CY 2017. R Chandrashekhar, president, Nasscom, pointed out angel tax was an impediment. “The Centre and Sebi have both agreed changes need to be made but this has not happened,” Chandrashekhar said. He red-flagged the visible shift in funding from the seed stage where the funding has fallen fairly sharply.
Fund infusion from VCs and angels into start-ups, which were set up in the last five years, fell to $1.8 billion in H1CY17 from $2.1 billion in the corresponding period of 2016. The total number of start-ups in India which are less than five years old is now around 5,200. With more than 1,000 start-ups being founded this year, the high mortality rate has been accompanied by a growth of 7%. Much of the investment has come into ventures based in Bengaluru and the NCR. India moved to the 60th position in Global Innovation Index (up from 81 in 2015).
Sectors that investors are backing the most include Fintech and healthcare technology. Fintechs have attracted $200 million in HICY17 and have grown at over 30%. The healthcare technology vertical grew 28% mopping up $160 million. Among the biggies, Flipkart topped the charts raising $2.5 billion from Japanese internet major Softbank and another $1.4 billion from eBay, Tencent and Microsoft. Paytm too raised $1.4 billion from SoftBank earlier this year. Ola picked up $1.1 billion from Tencent and Softbank last month; the cab aggregator had earlier raised $250 million from Softbank.