Venture capital rush for Indian start-ups shows no signs of abating
More than two dozen new venture capital firms made investments in India in 2017 so far, but foreign investment has seen a decline this year
Mumbai: The venture capital rush for Indian start-ups refuses to subside as new foreign investors join the bandwagon. More than two dozen new investors made investments in India this calendar year, according to data from start-up tracker Tracxn and Mint research.
“We are increasingly witnessing first-time investors entering the Indian digital and technology space as well as dormant investors coming back. On the one hand, we see large, semi-strategic investors taking big and long-term bets and on the other, new venture and growth capital funds as well as family offices are getting more active,” said Pankaj Naik, co-head, digital and technology investment banking, Avendus Capital, a boutique investment bank.
A positive-looking macroeconomic environment and the promise of an online retail market that UBS Group AG expects will touch $48-60 billion by 2020—Morgan Stanley sees it at $120 billion—have attracted a new set of investors willing to bet their millions.
To be sure, foreign investments did see a decline this year, with a total of 49 deals amounting to $170 million compared with 80 deals generating about $225 million last year, according to data from research service Venture Intelligence, a research service focused on private company financials, transactions and valuations.
“Markets abroad are really stagnating and because of no better returns, foreign venture firms... have found India very opportunistic,” said Vineet Shingal, partner at law firm Khaitan and Co.
The new investors are far from being an uninitiated lot and most of them put in extensive homework before making investments.
“We had researched about Indian mobile gaming companies and identified 99Games as a result of that,” said Munehiko Eto, manager at Tokyo-based Dream Incubator, in an email interview. The firm made an entry in January when it participated in Udupi-based 99Games Online Pvt. Ltd’s fundraising round along with existing investors Ascent Capital and Kalaari Capital.
Dream Incubator prefers to call itself a “business producer” and has an appetite for more investments in India.
“DI has already invested in two fintech companies and has recently committed to invest in one more fintech company in India. It is seeking opportunities in mobile gaming, fintech, healthcare tech and digital media and 10 opportunities are on its investment shortlist now,” Eto added.
Start-up founders also see these investors helping them with expansion.
Shauryam Gupta, one of the founding members of Mech Mocha, a Bengaluru-based mobile gaming start-up which raised money from Shunwei Capital early this year, said, “Having Shunwei as our partner not only allows us to partner with Chinese developers but also gives us access to insights about the kind of games that do well.”
Shunwei is a Beijing-based venture capital firm focused on internet and technology investments.
For some founders, new investors have also helped them forge new relationships and expand their client base.
“In India, Credihealth is the first company to receive funds from Mountain Pine Capital (MPC). They are helping us build partnerships and connecting us to relevant organizations across the world. MPC is connecting us to UK-based medical firms and has done a boutique investment of over half a million in our company,” said Ravi Virmani, CEO and founder, Credihealth.
MPC is a private investment and advisory firm based in Singapore.