Venture capital funding in India has bounced back after a slowdown last year. Top venture capitalists said that now there is focus on leaders that are emerging in each sector and on companies that are capital efficient.
Among India-headquartered tech companies, there were nine fewer instances of funding compared with Q4 ’16, but total capital invested in the quarter jumped 550%, according to the ‘Asia Tech Investment Report’ by CB Insights, a data intelligence platform.
“You have seen consolidation in the market. Investments are going into (companies) which are seen as market leaders,” said Sandeep Singhal, co-founder of Nexus Venture Partners which counts tech company Druva and online retailer Snapdeal among its portfolio companies.
Notable investments this year included Flipkart’s $1.4 billion Series J, a $330 million Series H to Olacabs, and a $200 million Series A to Paytm E-Commerce, according to the CB Insights report.
Mr. Singhal said that there is now more focus on companies that are building businesses in a capital-efficient manner compared with the past. “We are looking for competitive differentiation beyond just discount-led models,” he said.
T.C. Meenakshisundaram, founder and managing director of IDG Ventures India Advisors said that a lot of uncertainty has gone away and positive sentiment is coming back for investments. But he cautioned that there is not going to be a flood of funds like ‘spray and pray’ model in the past in sectors where investors have already burnt their money. “The bar is going up, clearly. We are also not going to see crazy valuations,” said Mr. Meenakshisundaram whose venture capital firm counts Flipkart and cancer-treating robotics firm Perfint Healthcare in its portfolio.
Investors are also eyeing start-ups that survived the last two years in difficult industries, like food tech where scores of companies shut down. Last month, food delivery start-up Swiggy raised $80 million led by the South African Internet and media group Naspers. Ashutosh Sharma, head of investments in India, Naspers, said that Swiggy’s exceptional execution in disrupting online food ordering and delivery in India was attractive, “while many players are struggling.” Swiggy promises to deliver food in about 37 minutes. Its delivery executives use smartphones and an algorithm-powered app to efficiently deliver food.
Artificial intelligence
This year, $4.74 billion has been invested till date in Indian tech start-ups compared with $4.55 billion and $8.94 billion invested in the years 2016 and 2015 respectively, according to data from start-up and venture capital tracker Tracxn. Top sectors that attracted capital this year include enterprise tech, health tech, fintech, retail and pure technology — which include companies focused on artificial intelligence, drones, 3D Printing and Internet of Things, according to Tracxn.
“Deep tech and artificial intelligence companies are getting support from local sectors and that is heartening,” said said Arun Natarajan, founder of the research firm Venture Intelligence. “Earlier they wouldn’t get funded,” he said.
