Venture Capital (VC) investment in India is expected to remain strong in Q4’19 and into Q1’20, however, given the current credit squeeze it might not be as robust as it has been over the past two quarters, according to the Q3’19 edition of the KPMG Enterprise Venture Pulse Report. The report offers interesting insights into important trends, opportunities and challenges, that impact the venture capital space globally as well as key regions around the world.
VC investment in India climbed substantially quarter over quarter, led by a number of $100 million funding rounds, including a $490 million raise by Ola, a $373 million raise by Udaan, a $350 million raise by 3rdFlix Visual Effects, and a number of other significant rounds.
Also, the Indian VC market showed a wealth of diversity during Q3’19, with a number of sectors attracting attention from investors, including fintech, logistics, education, social networking, mobility, and more. Of these, fintech continued to be the biggest bet with most deals happening in the payments or insurance spaces. Given the current and projected growth of ecommerce in India, logistics companies able to provide services for ecommerce companies are also receiving a lot of attention from VC investors in the country.
Commenting on the India findings, Nitish Poddar, Partner and National Leader, Private Equity, KPMG in India: “While there wasn’t a single large deal that stood out in Q32019, VC investment activity in general has been robust. While there is some credit squeeze in the economy, the underlying sector performance driven by strong consumption led growth in sectors including fintech, logistics, edtech and mobility, suggests a very strong pipeline. If there’s a slowdown, it is not likely going to have a significant impact in the near term."
Overall VC investment in Asia remained subdued in Q3’19, amid growing concerns surrounding the US-China trade tensions and a slowdown in China’s economy. Many VC investors across the region have become more cautious, focusing their investments on companies with proven technologies and business models, large sales, or well-defined paths to profitability.
VC-backed companies in the Asia region raised $14.9 billion across 922 deals in this period.
Looking forward to Q4’19, VC investment in Asia is expected to remain moderate at best — particularly in China, where the economic and geopolitical tensions are expected to continue. China’s central government is not standing still, however. It is forging ahead with policy reforms aimed at improving and modernizing regulations for a wide range of industries, including insurance, finance, capital markets, and healthcare. While the private sector is still working to understand how these changes will affect them, over time, these changes will likely have a positive effect on the VC market in China.
While there continues to be a significant amount of liquidity in the global VC market, it is expected that VC investors will be more cautious when making investments over the next quarter and into 2020, putting greater emphasis on company business models and expectations related to profitability.
Fintech, transportation, mobility, healthtech, and biotech are all expected to be hot areas of VC investment on a global level, with AI continuing to be a critical focus at a technology level. B2B solutions, productivity solutions, and solutions with real world impacts are also expected to grow on the radar of investors.
Global economic and geopolitical uncertainty is expected to remain relatively high over the next few quarters given the rapidly approaching Brexit deadline, no signs of a break in the US-China trade war, and the US presidential election slated for late 2020.