Venture capital investments in India at $1.4 bn in 2016, dip 21%; IT stays favourite segment

By: | Published: December 31, 2016 6:44 AM

Venture Capital firms made 405 investments in India, worth $1.4 billion during 2016 as compared to 512 deals worth $2 billion in 2015.

Venture Capital firms, Investment, Venture Intelligence, information technology, IDG Ventures India, Accel IndiaVenture Capital firms made 405 investments in India, worth .4 billion during 2016 as compared to 512 deals worth billion in 2015. (Source: IE)

Venture Capital firms made 405 investments in India, worth $1.4 billion during 2016 as compared to 512 deals worth $2 billion in 2015, which is 21% lower in volume terms and 28% lower in value as compared to the all-time highs of 2015, according to a data from Venture Intelligence.
With 304 investments worth about $1 billion, the information technology and IT-Enabled Services (IT & ITES) industry retained its status as the favorite among VC investors during 2016, accounting for 75% of the investments (69% by value). Investment activity in IT companies were down 17% compared to 2015.

Among top IT investments, cloud telephony firm Knowlarity, online SME loans provider LendingKart and database software firm ScaleArc raised $20 million each, while online pharmacy Pharmeasy raised $18 million and foodtech company FreshMenu raised $17 million. Within IT, while consumer internet and mobile companies continued to be the main area of focus (grabbing 77% of the investments), VCs also invested substantially into enterprise technology companies (especially SaaS startups like Helpshift, Betaout and Zarget) and B2B marketplaces (like Power2sme, ofBusiness and Just Buy Live).

Healthcare & life sciences were the distant second favorite destination for VCs (attracting less than a tenth of investments attracted by IT companies) raising 23 investments worth $129 million (against 38 deals worth $236 million in 2015). Preventive healthcare company Curefit, founded by former Flipkart executives, raised $15 million from IDG Ventures India, Accel India and Kalaari Capital, while dialysis service provider Nephroplus raised $15 million from Sealink Capital and IFC.

Food & beverages companies attracted 14 investments worth $57 million in 2016 compared to 18 investments worth $81 million in the previous year. Cremica Food Industries, which split from the family business of Bector Food Specialties, raised $15 million from Rabo Equity, while restaurant chain firm Azure Hospitality raised $10 million from Max Ventures and Morgan Stanley. Beverage companies attracted specific investor attention during 2016 with beer maker Bira 91 and fruit juice makers Raw Pressery and Good Juicery attracting capital.

“Series A” rounds (which refer to the First Round of institutional investment into start-up companies) saw a 45% fall in 2016 to 125 transactions compared to the 229 deals in 2015, the Venture Intelligence analysis showed. The action in other stages were largely flat compared to 2015.

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Bengaluru-based startups continued to top the funding charts (attracting 130 investments) during 2016, NCR based companies (at 111 investments) firmed their lead over Mumbai-based companies (with only 90 investments). With its mix of logistics tech and enterprise tech companies, Pune-based companies (which attracted 15 investments) pipped Chennai-based companies (which attracted 13 investments predominantly into enterprise tech companies) for the fourth place.

“If there was one word that described VC investments in 2016, it was Selectivity,” remarked Arun Natarajan, founder of Venture Intelligence. “Whether it was in terms of new sectors or even which companies to provide follow-on funding to within their existing portfolios, VC investors were very selective in their approach during 2016. With the weaning out of companies with weak business models having already taken place substantially and with many of the VC firms like Accel India, Sequoia Capital, Blume Ventures sitting on substantial amounts of capital raised in recent months, there is scope for cautious optimism as we enter the New Year.”

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