Venture capital investments surge in September quarter

Venture capital companies ploughed in $1.04 billion between July and September as against $584 million in the June quarter

Photo: Mint
Photo: Mint

Bengaluru: Venture capital (VC) investment in India almost doubled in the September quarter from the preceding three months even as number of deals remained flat, signalling big-ticket funding and something of a revival in investor interest which had hit rock bottom, according to a KPMG-CBInsights report.

Venture capital companies ploughed in $1.04 billion between July and September as against $584 million in the June quarter, although the number of deals was flat at 108, from 107 in the previous quarter.

Venture capital investments in India have been falling since October-December 2015.

Investments in the December quarter halved to $1.5 billion from $3.4 billion in July-September 2015 and further slumped to $1.4 billion in the March quarter.

Investors have turned cautious and are questioning business models and valuations before pouring money into start-ups. Apart from demanding that start-ups slow down expansion, slash costs and cut discounts, many VCs are setting performance milestones, and some are only releasing funds in instalments, Mint reported in January.

The September-quarter saw some large funding rounds, with Bigtree Entertainment Pvt. Ltd, which owns online entertainment ticketing platform BookMyShow, raising $75 million, online hotel-room aggregator Oyo about $60 million, TCNS Clothing Co Pvt Ltd, owner of the W brand of women’s clothes, raising $140 million and Concord Biotech Ltd $70 million.

Investments could rebound in the September-December quarter as Flipkart Ltd, online payments firm Paytm (One97 Communications Ltd) and its rival, the Snapdeal-owned Freecharge, cab-hailing service Ola (ANI Technologies Pvt.Ltd) and healthcare start -up Practo Technologies Pvt. Ltd are seeking large funding.

“The investment environment in India is becoming stable with clearer business models emerging in the start-up ecosystem, said Sreedhar Pra- sad, partner, e-commerce and start-ups, at KPMG in India.

“Though speed of investments has not increased, we see a clear increased interest by investors in financial technology start-ups with online-to-offline models which have better control in the ecosystem, as well as interest in the payments space,” Prasad said in a statement.

Globally, venture capital investment shrank by about 14% in the September quarter from the previous quarter.

Between July and September, venture capital investment stood at $24.1 billion as against $28.1 billion between April and June.

Deal volume, however, remained almost flat, growing to 1,983 deals in the September quarter, five more than the previous quarter.

The June quarter included multi-billion dollar fundraising by cab-hailing companies Uber Technologies Inc. and Didi Chuxing, as well as messaging app Snapchat which were not matched in the September quarter.

Even the median value of late stage deals slumped to $22.1 million in the September quarter as against $25 million in the previous three months.

Total funding raised in the September quarter was the lowest since 2014, when venture capital investment stood at $22 billion.

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“There is liquidity in the market, but venture capital investors are very hesitant to put the money to work,” said Arik Speier, co-leader, KPMG enterprise innovative start-ups network and head of technology, KPMG in Israel.

“Given the market conditions, we should continue to see fewer mega rounds over the next quarter. Investors will likely continue to be cautious, with any late-stage deals linked to external milestones, such as development, market penetration, profitability or gross revenues,” Speier said in a statement.

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