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January 02, 2017

Selectivity is the keyword as Venture Capital investments dip 21% in 2016

At 405 deals worth $1.4 Billion, 2016 is 2nd Biggest Year for VC investments after 2015, Venture Intelligence data shows


Venture Capital firms made 405 investments in India worth $1.4 Billion during 2016 compared to 512 deals worth $2 Billion in 2015 according to data from Venture Intelligence, India’s longest provider of data on private company financials, transactions and their valuations. These figures - 21% lower in volume terms and 28% lower in value compared to the all-time highs of 2015 - make 2016 the second largest for VC investments in country. (Venture Capital is defined by Venture Intelligence as Seed Round to Series D round of investments less than $20 million in size by intuitional investors in companies less than 10 years old.)

Top VC Investments in 2016

Company
Investors
Amount
Knowlarity
(Cloud Telephony)
Sequoia Capital, Delta Partners, Others
$20 M
Lendingkart
(SME Lending)
Mayfield, Bertelsmann India, Others
$20 M
ScaleArc
(Enterprise Software)
Nexus Ventures, Accel India, Others
$20 M
PharmEasy
(e-Pharmacy)
Bessemer, Aarin Capital, Orios VP
$18 M
FreshMenu
(Food Ordering)
Lightspeed, Zodius Capital, Others
$17 M



With 304 investments worth about $1 Billion, the Information Technology and IT-Enabled Services (IT & ITES) industry retained its status as the favorite among VC investors during 2016, accounting for 75% of the investments (69% by value). Investment activity in IT companies were down 17% compared to 2015. Among the top IT investments, cloud telephony company Knowlarity, online SME loans provider LendingKart and database software firm ScaleArc raised $20 million each, while online pharmacy Pharmeasy raised $18 M and foodtech company FreshMenu raised $17 million. Within IT, while Consumer Internet & Mobile companies continued to be the main area of focus (grabbing 77% of the investments), VCs also invested substantially into Enterprise Technology companies (especially SaaS startups like Helpshift, Betaout and Zarget) and B2B marketplaces (like Power2sme, ofBusiness and Just Buy Live).

Healthcare & Life Sciences were the distant second favorite destination for VCs (attracting less than a tenth of investments attracted by IT companies) raising 23 investments worth $129 million (against 38 deals worth $236 million in 2015). Preventive healthcare company Curefit, founded by former Flipkart executives, raised $15 million from IDG Ventures India, Accel India and Kalaari Capital, while dialysis service provider Nephroplus raised $15 million from Sealink Capital and IFC.

Food & Beverages companies attracted 14 investments worth $57 million in 2016 compared to 18 investments worth $81 million in the previous year. Cremica Food Industries, which split from the family business of Bector Food Specialties, raised $15 million from Rabo Equity, while restaurant chain firm Azure Hospitality raised $10 million from Max Ventures and Morgan Stanley. Beverage companies attracted specific investor attention during 2016 with beer maker Bira 91 and fruit juice makers Raw Pressery and Good Juicery attracting capital.


“Series A” rounds (which refer to the First Round of institutional investment into start-up companies) saw a 45% fall in 2016 to 125 transactions compared to the 229 deals in 2015, the Venture Intelligence analysis showed. The action in the other stages were largely flat compared to 2015. 


While Bangalore based startups continued to top the funding charts (attracting 130 investments) during 2016, NCR based companies (at 111 investments) firmed their lead over Mumbai-based companies (which attracted only 90 investments). With its mix of logistics tech and enterprise tech companies, Pune-based companies (which attracted 15 investments) pipped Chennai-based companies (which attracted 13 investments predominantly into Enterprise Tech companies) for the fourth place.

Most Active VC Investors in 2016

Investor
2016
2015
Accel India
26
39
Sequoia Capital India
24
41
Blume Ventures
23
17
Kalaari Capital
18
21
Aarin Capital
16
9
Ratan Tata
16
11

If there was one word that described VC investments in 2016 it was Selectivity,” remarked Arun Natarajan, Founder of Venture Intelligence. “Whether it was in terms of new sectors or even which companies to provide follow-on funding to within their existing portfolios, VC investors were very selective in their approach during 2016. With the weaning out of companies with weak business models having already taken place substantially and with many of the VC firms like Accel India, Sequoia Capital, Blume Ventures, etc. sitting on substantial amounts of capital raised in recent months, there is scope for cautious optimism as we enter the New Year.”

The above data are extracts from the Venture Intelligence 2016 PE Roundup Report based on latest data from the Venture Intelligence PE Deals database. The full Report will be mailed to Venture Intelligence subscribers in the next few days.

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.