The Indian startup ecosystem is gaining growing confidence from international venture capital firms such as Sequoia, Accel, and Lightspeed, which are preparing to invest more considerable funds while waiting for the right opportunity.
The Indian startup ecosystem shows symptoms of a fundraising slowdown, but numerous global investment firms have made fresh commitments of nearly $4.5 billion for the sector.
During the past few months, illustrious venture capital firms such as Sequoia, Accel, Matrix, and Lightspeed, amongst others, have indicated that they will be raising additional funds with an explicit focus on early-stage investments in India; however, it is currently unknown when these newly raised funds will begin to flow into Indian businesses.
For early-stage investments, a number of domestic companies have or are in the process of obtaining money from investors.
A new all-time high of $38.5 billion will be raised by the Indian startup community in 2021. There has been a significant change in momentum this year, especially in Q4, when investments fell to their lowest level, due primarily to global issues.
“New sectors tend to rise and sprout when one is in this setting. Rocketship.vc’s Venky Harinarayan, a partner, adds, “This is what excites us.” Rocketship.vc raised $125 million in its third fund’s initial closing earlier this month.
The venture capital firm in Silicon Valley, which has supported almost two dozen domestic businesses such as NoBroker, Khatabook, and Jar, did not disclose how much of the funds it will deploy in India from its new fund. Among these startups are NoBroker, Khatabook, and Jar.
According to YourStory Research, between January and June, Indian startups closed 891 deals totalling $17.1 billion in funding, an increase of 82.8 per cent compared to the first half of 2021. Nevertheless, it is essential to evaluate these figures in the context of the second half of 2021, during which a total of $22.7 billion was invested in 865 separate transactions.
In addition, it is pretty likely that most of the agreements announced in the first half of this year were conceived and carried out at least a couple of months earlier. It is anticipated that the actual slowdown will begin to become apparent in the second half of this year.
On the other hand, VCs are very confident about investing in Indian firms.
In terms of new funding for Indian businesses, Sequoia has accounted for the majority of it. Sequoia India and Sequoia Southeast Asia funded a total of $2.85 billion across several investment funds in India, including a venture fund and a growth fund.
“This fundraise, which comes at a time when markets are starting to cool after a very long bull run, signals our deep commitment to the region and the faith our Limited Partners have in the long-term story of India and Southeast Asia,” the VC firm said in its blog.
Several hedge funds have boosted the size of their funds in addition to the fresh money raised for India. It was announced in March that Accel had raised $650 million for its sixth fund. With that in mind, the company’s sixth fund was only $550 million in size.
In addition, the slowdown has not had a significant impact on startups that are in the early stages of their development.
There is a higher slowdown in the growth stage than in the early category, says Rema Subramanian, the Co-founder of Ankur Capital.
She also mentioned that early-stage investments have a high probability of making a profit.
More considerable private equity funds such as Tiger Global and SoftBank are slowing down due to losses experienced in the fiscal year that ended in March. This has a more significant impact on later-stage investments than earlier ones. These companies are often in the Series C and later phases of the investment process.
According to several publications, Tiger Global has begun to invest in early-stage firms, particularly in the Series A and B levels of development. Indeed, the business made its first seed-stage investment in Shopflo, a SaaS startup, earlier this year.
Amidst all this, additional VC firms have declared plans to raise separate funds for India, including domestic and international firms. In addition, there are Eight Roads Ventures, IvyCap, Jungle and Ganesha.
Fintech, ed-tech, B2B, SaaS, crypto, blockchain, and agritech are just a few areas where global VCs invest more in India.
In light of the current situation, the emphasis will be on identifying fresh investment opportunities. “The secular movements around India are still quite strong,” says one venture capitalist.
Investors in the industry believe that now is an excellent time to purchase because the ecosystem is quieter, and it is easier to determine which companies to invest in.
“We are in a period of transition,” says Venky of Rocketship, “though it is hard to say where it is going to settle.”
As originally reported in https://yourstory.com/2022/07/fresh-vc-money-waiting-indian-startup-ecosystem-funding/amp