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March 29, 2016

Tiger Global Vs Ratan Tata: Who Will Indian VCs Follow?

As Tiger Global and various international investors step on the brake at their investment vehicles, there is one class of investor - Family Offices - that is stepping on the accelerator.

Using data from the Venture Intelligence PE/VC Deals Database, we looked at VC deals (including Growth Capital investments of over $20 million in tech startups) over the last twelve months – in two distinct halves. The first half of the Indian fiscal year - April 2015 to September 2015 - things were quite rosy all around and all kinds of international investors - from Hedge Funds (with colorful names) to European & Russian Billionaires - pouring capital into Indian startups. With the next six months witnessing a cooling off in investment activity (at least when compared to the first half of 2015), Venture Intelligence dove into the data to find which class of investors braved ahead and which took their cues from the nervousness flowing in from Silicon Valley.

Investment activity of Hedge Funds and related investors (ie typically public markets focused)  – including key Flipkart backer Tiger Global (which made 5 investment in the latest 6 months vs 18 in the previous 6 months) - was down the most: as much as 67%. Hedge Funds which followed Tiger into the Indian start-up land - names like Steadview Capital, Falcon Edge Capital, etc. – went completely missing post October 2015. Corporate VCs – like Qualcomm Ventures (4 investments in the latest 6 months vs 9 in the previous 6 months), Nokia Growth Partner (0 vs 3), etc. – have also slowed down significantly (by 44%).

At the other end of the spectrum, the Family Office category has been up the most – as much as 38%. This segment of investors,  led by names such as Ratan Tata (12 vs 7), Ronnie Screwvala (6 vs 2) and various Infosys Co-Founders, who were already quite active in the first half, stepped on the accelerator pedal in the second half.

Interestingly, among traditional Venture Capital funds, India-dedicated funds - which have raised money to be deployed only in India, like Sequoia Capital India (16 deals vs 31) and Accel India (17 vs 27) - slowed down their investment activity (down 36%) more compared to Foreign VCs (down 22%).  Among foreign funds (which have a choice to deploy their capital in geographies other than India as well), Japanese Early Stage VCs like Beenos Partners (7 deals vs 5 deals) and M&A Partners (5 vs 4) stepped up their pace.


Angel Investment Networks and Super Angels as well as the Impact Investors / Social VC segments maintained about the same pace of the investments across both periods. In fact, the recent 6 months has witnessed the entry of several more independent angels - making their first set of investments as professional investors – into the Indian start-up ecosystem. The period has also witnessed Impact Investors leading rounds at online services and E-Commerce companies – for example, Aspada Investments led a $5 million round for entry level jobs marketplace Aasaanjobs with existing financial VCs in the company (IDG Ventures India and Inventus Capital) co-investing.

Looking Ahead

Will Hedge Funds and Family Offices continue swimming in opposite directions in the months ahead? And, who will the Financial VCs – who provide the bulk of the capital for Indian start-ups - follow: Tiger Global and Russian Billionaires or Ratan Tata and Nandan Nilekani?

Coverage of the Venture Intelligence "Changing Investor Mix" Study on ET-Now's Startup Central Show:


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