This article is an extract from Inc42’s ‘Annual Indian Tech Startup Funding Report 2018’ which provides a detailed analysis of the funding trends and Mergers & Acquisitions (M&As) in the Indian startup ecosystem for the period 2014-2018. To read other articles of this report, click here.
Venture capital funds (VCs) — both local and foreign — have acted as a key catalyst in shaping the Indian startup ecosystem of today. Not only they have brought in much-required financial aid to the rising breed of entrepreneurs but have also complemented their growth as a whole.
According to Inc42 DataLabs annual Indian Tech Startup Funding Report 2018, an amount of $11 Bn across 743 deals was raised in 2018, which is slightly lower than in 2017.
This clearly signals the fall in VC funding as well in the overall ecosystem. In 2018, a total of 282 venture capital funds as compared to 315 in 2017 invested in the Indian startup ecosystem. However, a moderately increasing trend was observed in the ratio of VCs to total investors investing in the ecosystem, reaching 2.38 last year as compared to 2.19 in 2017.
Of these, five venture capital funds were the most active. Accel Partners India grabbed the top spot with 28 deals. It was followed by Sequoia Capital India (24) and Blume Ventures (18). The fourth position was a tie between Nexus Venture Partners and Kalaari Capital, each signing off 15 deals in 2018.
Accel Partners India
Accel Partners India had a proud moment in 2018 with one of its portfolio companies, Freshworks, getting tagged as a unicorn. Accel Partners led the $100 Mn round in participation with Sequoia Capital.
With 10 investments till June 2018, the venture capital fund grabbed the lead spot in overall tech startup funding ranking.
Sequoia Capital India
The year 2018 was a mix of good and bad for Sequoia Capital. The venture capital fund announced the close of its sixth fund at a fund corpus of $695 Mn, which was 25% less than the original fund target of $1 Bn.
However, on a good note, Sequoia India now intends to speed up its investments in early and growth-stage startups, which are facing a serious gap in funding at present. The firm also had to face chaos related to the restructuring of its Indian leadership team.
Overall, the venture capital fund was able to push through its counterparts and gain the third spot in the Indian tech startup funding ecosystem.
Notable deals signed by Sequoia Capital India were Bengaluru-based hyperlocal subscription-based delivery startup DailyNinja, Mumbai-based organic juice startup Raw Pressery, FreeCharge founder Kunal Shah’s new venture Incred, StanzaLiving, Meesho, Turtlemint and more.
For the first two quarters of 2018, Blume Ventures led the funding deals chart by investing in a total of 11 startups between January and June. However, after that, it pushed the brakes, re-routing to long-term planning. Blume not only announced the first close of its $80 Mn Fund III at $40 Mn but also tied up with two US-based funds — Benhamou Global Ventures (BGV) and Emergent Ventures — to launch accelerator platform-cum-fund Arka Venture Labs.
Blume Ventures also announced it would steer 35-40% of the fund on startups focussed on deep tech and software tech as well as blockchain.
Some of the notable startups Blume invested in last year were Bengaluru-based car repair and servicing startup Pitstop, Gurugram-based healthcare analytics startup THB (Technology | Healthcare | Big Data Analytics), and Mumbai-based wedding startup The Wedding Brigade.
Nexus Venture Partners
Nexus Venture Partners continued with its bet on tech startups in 2018 among speculation that it was raising its fifth fund worth $400 Mn. With $1.2 Bn assets under management, Nexus Ventures has climbed one step at the ladder, raising its ranking from fifth in H12018 to fourth as the year ends.
Kalaari Capital is currently managing around $650 Mn and is known for a few of its top-notch investments like Snapdeal, Dream11, Curefit, MilkBasket, and more. The VC firm is now speculated to launch its fourth fund with a corpus of $125 – $150 Mn in the coming months.
Although Kalaari Capital saw the exits of quite a few senior executives over the last year, it managed to regain its spot among the top five VCs by the end of 2018, as compared to the H1 2018 list.
Both Snapdeal and Zivame failed to bring the expected returns for Kalaari Capital in the past and now, it is betting primarily on new-age startups.
The Indian startup ecosystem has been a success story with its own ups and downs, with its unique, innovative products and services catering to unique Indian problems and global ones.
According to a recently-released Bain & Co report supported by the Indian Private Equity & Venture Capital Association (IVCA) entitled ‘Perspectives on Indian VC Ecosystem, 2018’, as the Indian startup ecosystem matures, exits are expected to increase — 80% startup founders are expecting investor exits by 2024.
All the more reason for venture capital funds to make strong bets on the Indian startup ecosystem.
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