Venture Capitalist banking on Indian market

Global FundraisingBy Profit Board Last updated on Dec 9, 2020

The Indian startup ecosystem is the third largest ecosystem in the world with almost 40000 startups. Entrepreneurs in the country have adapted quickly and effectively to COVID-19 in response to the rapidly evolving market dynamics, customer preferences, and operating conditions.

COVID 19 did cause a decline in the VC investments, especially from April to June 2020. The amount of funding and the total number of deals fell by 48% and 37%, respectively, in Q2 2020 over the corresponding period last year. Less than 50 startups raised their first round of funds in Q2 2020, while 52% of startups struggled to raise additional funding, as per reports.

However, now, the Indian economy, key indicators have turned positive. India’s startup and VC ecosystems continue to thrive. VCs have adopted a long-term view based on the country’s growth potential. They see the current slowdown as more cyclical than structural.

The 2019 story

In 2019, India Inc saw an investment of INR 1,211 billion (YoY growth: 60.5 per cent) in the form of private equity investments with the internet, computer software, utilities, financial services and transportation among the top gaining sectors. Additionally, India successfully materialized 616 deals with an average deal size of INR 1,967 billion.  For India’s venture capital industry, 2019 was a milestone year with $10 billion deployed into startups, a 55 per cent jump from 2018, according to Bain & Company.

2020 – Global VCs turning to Indian Markets

Leading VC firms are setting up India-centric funds. In July, Sequoia committed $1.35 billion to new India funds, including a $525 million venture fund and a $825 million growth fund. Recently, Lightspeed also announced the closing of the Lightspeed India Partners III Fund with $275 million of committed capital. There are various other similar funds that have come up. This is a strong indicator that India Inc is emerging to be one of the strongest investment markets for VCs globally.

There are very specific reasons behind India’s emergence as a global VC’s preferred destination. Enterprise innovation, cost-effectiveness, pool of qualified talent are major factors. The evolution that occurred in the US, has started to play out in India as well. Contributing to it are the added factors of geography and population. The number of mobile internet users will likely cross 1.5 billion by 2030 in India and SEA. Adding to it is the current political and trade tensions between the US and China. New India is also a staunch believer in forging global partnerships. All these factors are contributing to India’s emergence as a strong market.

 

Read the full article on: The Statesman

 

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