Bangalore: Venture capital investment in Indian firms fell by as much as 71.7% by value in the first six months of 2009 compared with a year ago, adding to the woes of businesses already stressed by the global slowdown.
Between January and June, VC firms invested $117 million, sharply down from the $413 million they had invested in the same period in 2008. Sandeep Bhatnagar / Mint
Between January and June, venture capital (VC) firms invested $117 million (about Rs570 crore), sharply down from the $413 million they had invested in the same period in 2008, according to a study by Venture Intelligence, a Chennai-based researcher that focuses on private equity and VC. The number of deals fell to 27 from 67.
Investors wanted to play safe and be cautious in their new deals, said Arun Natarajan, chief executive officer, Venture Intelligence. Besides, limited partners, who back VC firms, also have not been keen on new investments. “They were themselves hurt in the public market and did not want to further increase their risks,” Natarajan said.
Venture Intelligence conducted the study in partnership with Global India Venture Capital Association.
The biggest deal in this period was a combined $15 million investment in mobile broadband gateway provider Stoke Inc. by Reliance Technology Ventures, NetOne Systems, Kleiner Perkins Caufield and Byers, Sequoia Capital, Integral Capital Partners, Pilot House Ventures and DAG Ventures.
The other large deals are: JAFCO Asia and VenturEast’s $12 million investment in si2 Microsystems Ltd, a semiconductor firm, and a $6.5 million investment in Global Talent Track Pvt. Ltd by Intel Capital and Helion Venture Partners.
Bangalore-based Helion was the most active with six deals, of which four were new, one was a follow-on deal and another a late-stage deal. Its four new deals were in the non-information technology (IT) space.
IT and IT-enabled services (ITeS) companies accounted for 52% of the VC deals, with 14 VC investments in the first six months. In value, VC investments in these firms were worth about $75 million, or 63% of the total deals. Among ITeS firms, online services companies attracted 57% of the money.
Domestic demand-driven sectors such as financial services, healthcare and education also attracted VC attention.
Early-stage deals—first or second round of VC investments into firms less than five years old—accounted for two-thirds of the investments and 57% in value, the study shows.
Venture capitalists are optimistic that the economic environment will improve in the coming months. “While the uncertainty in global financial markets over the last six months has affected VC investing in India as well, there are clear signs of revival over the last couple of months, especially in emerging markets like India,” said Sudhir Sethi, founder and managing director, IDG Ventures India.