Venture capital rush for Indian startups shows no indications of ending

MUMBAI: The venture capital rush for Indian startups refuses to subside as new foreign investors join the bandwagon. More than two dozen new investors made investments in India this calendar year, according to data from Tracxn, a startup tracker and Mint research.

“We are increasingly witnessing first-time investors entering the Indian digital and technology space as well as dormant investors coming back. On the one hand, we see large, semistrategic investors taking big and long-term bets and, on the other, new venture and growth capital funds as well as family offices are getting more active,” said Pankaj Naik, co-head, digital and technology investment banking, Avendus Capital, a boutique investment bank.

A positive looking macroeconomic environment and the promise of an online retail market that UBS Group AG expects will touch $48-60 billion by 2020 and Morgan Stanley sees at $120 billion have attracted investors willing to bet their millions.

To be sure, foreign investments did see a decline this year with a total of 49 deals amounting to $170 million as compared to 80 deals generating about $225 million last year, as per data from Venture Intelligence, a research service focused on private company financials and transactions.

“Markets abroad are stagnat- ing and because of no better returns, foreign venture firms... have found India very opportunistic,” said Vineet Shingal, partner at law firm Khaitan & Co.

New investors are far from being an uninitiated lot and most of them put in extensive homework before investing.

“We had researched about Indian mobile gaming companies and identified 99Games as a result of that,” said Munehiko Eto, manager at Tokyo-based Dream Incubator in an email interview. In January, the firm participated in Udupi-based 99Games Online Pvt Ltd’s fundraising round along with existing investors Ascent Capital and Kalaari Capital.

Dream Incubator prefers to call itself a “business producer” and has an appetite for more investments in India. “DI has already invested in two fintech companies and has recently committed to invest in one more fintech company in India. It is seeking opportunities in mobile gaming, fintech, healthcare tech and digital media and 10 opportunities are on its investment shortlist now,” Eto added.

Startup founders also see these investors helping them with expansion.

Shauryam Gupta, one of the founding members of Mech Mocha, a Bengaluru-based mobile gaming startup which raised money from Shunwei Capital early this year said, “Having Shunwei as our partner not only allows us to partner with Chinese developers but also gives us access to insights about the kind of games that do well.”

Shunwei is a Beijing-based venture capital firm focused on technology investments.

For some founders, new investors have also helped them expand client base.

“In India, Credihealth is the first company to receive funds from Mountain Pine Capital (MPC). They are helping us build partnerships and connecting us to relevant organisations across the world,” said Ravi Virmani, CEO and founder, Credihealth.