Mangalore: Venture capital firms Sequoia Capital India, Draper Fisher Jurvetson (DFJ) India and NEA-Indo US Ventures were the most active venture capital investors in India last year, a period that saw 19 fewer deals and a 15.5% fall in investment compared with 2007 because of a global financial crisis that turned investors more conservative.
An executive at Sequoia said valuations would decline further, which could mean that young companies will find it difficult to raise money. “Private market valuations are not yet reflecting the sentiments of the public market. Valuations will get adjusted in two to three quarters,” said K.P. Balaraj, managing director, Sequoia.
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DFJ India’s executive director Mohanjit Jolly said his company would have struck more deals if not for (high) valuations. Rahul Khanna, director, Clearstone Venture Advisors, which closed only one deal in 2008, said the company held back.
“We are (in) no hurry to strike deals and impractical expectations haven’t diminished completely,” he said.
Last year’s numbers would have been lower than 2007’s if not for significant activity in the first six-eight months. The global financial crisis really set in only in September with the mid-month collapse of Wall Street icon Lehman Brothers Holdings Inc.
In the nine months to September, venture capital firms here invested $630 million (Rs1,403 crore today) according to data from Venture Intelligence, a research firm focussed on venture capital and private equity activity. In the entire year, they invested around $740 million in 125 deals. In 2007, they invested $876 million in 144 deals.
Sequoia struck a total of 11 deals in the year, investing around $60 million, while DFJ India made eight investments worth $32 million, and NEA-Indo US funded seven deals with $23 million, according to Venture Intelligence.
While Sequoia’s Balaraj added that 2009 would likely see the same number of deals as 2008, DFJ India’s Jolly said his company expects to strike only three or four deals this year, but added that this number could increase.
Venture Intelligence’s chief executive officer Arun Natarajan said investments would continue to flow into Indian companies in 2009 although investors would likely remain cautious till March.
“VC deals should continue unabated as investors like Nexus India Capital, Accel India Venture Fund, Sequoia and Helion closed funds in 2008. Most of them have cash in hand,” he said.