Compared sequentially, the funding in the first three months this year is higher than the $959 million raised across 248 deals in the fourth quarter of last year. Even compared with the corresponding period a year ago, the volume of deals this year is higher against 165. In value terms, this year is pretty close to last year’s corresponding period that recorded $1.5 billion.
What has changed is the pecking order of the biggest fund providers of Indian start-ups.
Tiger Global (14), Sequoia Capital (14) and IDG Venture Cap (9) were the top three fund providers for the last year’s corresponding quarter. They are conspicuous by their absence in the top-three chart now. For Tiger Global, this is a real slowdown as industry has been talking about the US-based fund not participating in the next rounds of funding in India.
For Silicon Valley’s top tier venture fund, Sequoia, it could be a temporary blip as it raised a fresh fund of $920-million last month. A large chunk of this is expected to be used in India. Saif Partners (10), Tracxn Labs (10) and Accel Partners (9) occupy the top three in terms of volume this year.
“There is still dry powder available and with acceptance of down-rounds where start-ups are willing to raise funds at valuations lesser than their previous fund-raising, we are still seeing a reasonable deal activity,” says Rastogi.
Flipkart’s $15-billion valuation was slashed 27 per cent last month by marquee investment bank Morgan Stanley, bringing a cascading effect on Indian start-ups and their fund-raising expectations. This is expected to help revive the funding.
The changed expectations have also led to consolidation talk in the sector replete with multiple players in each category.
“We expect M&As to accelerate over the next 12-24 months as companies come together to become clear leaders in their segments or consolidate and strengthen their investor base,” Aashish Bhinde, executive director at Avendus Capital, recently told Business Standard. The home-grown investment banking company has done the largest number of transactions in the Indian start-ups space. As start-ups mature, there is also a clear trend to avail of VC debt funds. “It is a comfortable option for some companies that don’t want to dissolve their stake but still need cash,” says Ajay Hattangdi, group chief operating officer and chief executive, InnoVen Capital India, the largest player in this segment. “We expect to do more venture-debt deals this year than the last.” The venture debt company did deals worth Rs 275 crore last year.