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September 02, 2016

Does More Trouble Lie Ahead for Indian Startups? Knowledge@Wharton

A Knowledge@Wharton article quotes Venture Intelligence data while analyzing issues in the startup ecosystem in India:
"Venture Intelligence, a leading provider of data on private company financials, transactions and valuations, notes while from April 2014 to March 2016 there were around 29 acquisitions in the Indian tech startup space, from April this year to mid-August the number has shot up to around 40."
"Venture Intelligence also notes that in 2015, 16 VC-funded startups shut shop during the course of the year. In 2016, from January to July itself an equal number of startups have already folded up. These include Fashionara, PepperTap, Zippon and Murmur. Post July, shutdowns include Exclusively, a fashion portal which was acquired by Snapdeal last year, TaxiForSure which was acquired by cab-hailing app Ola last year, and online market place and classified portal"
"...from January to June 2015, India saw PE investment of $7.31 billion across 373 deals and VC investment of $970 million across 242 deals. During the same period in 2016, PE dropped to $7.16 billion across 314 deals and VC dipped to $646 million across 211 deals."
What Lies Ahead?
Arun Natarajan, founder of Venture Intelligence, however, is more optimistic. He points out that several seed capital funds and India-dedicated VC firms including Sequoia Capital India, Kalaari Capital, Nexus Ventures and IDG Ventures India have raised new funds in the last 12 months. Also, several family offices, like that of industrialist Ratan Tata and the founders and executives of Infosys, have turned active startup investors. “So, there is sufficient ‘dry powder’ available within India to support new startups as well as existing portfolio companies [provided they are] able to demonstrate traction.”
Natarajan adds that given India’s growth potential, Indian startups “should also be able to attract sufficient long-term focused foreign investors as indicated by the increasing investments here by VC and strategic investors from Japan, South East Asia and China.” A recent example is the $175 million investment in August from Tencent, the founder of WeChat, China’s bestselling instant messaging app, and Foxconn Technology Group from Taiwan, in Hike, the Indian messaging app founded by Kavin Mittal. This is one of the largest investments in Indian startups in 2016 and values Hike at $1.4 billion.
...Mohandas Pai also shares - “India is sadly becoming a battleground for American and Chinese companies and Indian capital is losing out.” Pointing out that in China, 65% of VC funds is Chinese money while in India, only 5% comes from domestic capital, Pai says: “The Indian capitalists want assured returns with no risks. This mindset has to change. They should allocate at least 20% to 25% of their funds for venture capital.”

Venture Intelligence is India's longest serving provider of data and analysis on Private Company Financials, Transactions (private equity, venture capital and M&A) & their Valuations in India.