Sorry! VCs Don’t Want to Fund Your Billion-$ Idea
Number of venture capital deals fell by 35% during the first quarter of 2016 to 90
VIKRAMVAIDYANATHAN MD, Matrix Partners India A $25-million round last year is today at maximum a $9-10-million round, and those cheques are being written by traditional venture capital investors like us
Bengaluru: Venture capital investments in Indian startups have dropped sharply in the first three months of this year, falling by over one third compared to the same period in 2015.
Investors are terming this slowdown as the “new normal,” as it comes on the back of a frenzy of funding in the last two years.
The number of venture capital deals fell by 35% during the first quarter of 2016 to 90, as compared to 138 in the same period one year ago, according to data from risk capital data monitoring service VCCEdge.
The total value of venture capital invested took a drastic fall of over 80% during the first quarter of 2016 to $337 million from $1.79 billion, as mega-financing rounds disappeared and deal sizes turned modest.
“A lot of companies were overfunded last year,” said Vikram Vaidyanathan, managing director at venture fund at Matrix Partners India. “A $25-million round last year is today at maximum a $9-10-million round, and those cheques are being written by traditional venture capital investors like us.” The reduction in the number and size of transactions has been the sharpest at growth deals stage or the so called Series-C, where the number of deals fell by 75-80%. In earlier stages of Series-A and Series-B, fall in number of transaction has been around 50%.
The rush of capital for Indian startups began in 2014, after online marketplace Flipkart raised a mammoth $1billion in July 2014. Soon after China’s ecommerce giant Alibaba successfully listed its stock in the US markets, providing further fillip to the global ecommerce boom. Investors such as Japan’s SoftBank which benefited handsomely from the Alibaba IPO, turned their attention to India lavishing money on promising startups here. Since the the mood has changed with few hedge funds making new investments over the last three quarters, and global internet investors like Softbank and DST Global turning cautious.