According to latest data made available by financial research firm VCCEdge, the Indian startup ecosystem is not only continuing its dry funding run from last year, but it has slowed down even further.
The data from VCCEdge highlights that during the first quarter of 2017, the Indian startup ecosystem saw just 237 funding deals going through all the way. This 237 figure marks a 47 per cent decline from the number of deals that were locked in last year during the same period. Further, the data also revealed that the combined deal values have also plunged by 23 per cent to $165 million in the first quarter of 2017 when compared to the same period last year, and fell by a shocking 46 per cent from the preceding quarter. VCCEdge notes that the significant fall made the quarterly deal value the lowest in the period of over three years and it fell below the $300 million mark for the very first time in nine quarters.
Marking a not so good start of the year for the third largest ecosystem in the world, the first quarter of 2017 saw a decline in seed funding and angel funding, both in terms of value as well as volume. The number of early stage deals in the Indian startup ecosystem declined almost by 50 percent with just 120 deals going through the first quarter of 2017, when compared to the 245 deals figure in the same period the preceding year. Further, Series A funding rounds also saw a decline by 65 per cent in terms of deal value, while Series B rounds saw a 22 per cent increase in value even as the number of deals fell by 16 per cent.
While there is no denying the fact that the figures coming in from the first quarter are quite dismissal, but everything isn't lost. According to the VCCEdge report, even though the early stage funding deal numbers weren't so impressive, but the mid to late stage deals saw an upward trend, with Series B funding rounds growing by a good 22 per cent compared to the figures clocked in last year. In addition to this, the startups that still have their eyes set on profits and are working hard to achieve their targets continue being the favourites among investors.
According to Gaurav Roy, business head, VCCEdge, “A rise in Series-B funding even as seed and Series-A funding trends show a decline reflects investor cautiousness in early and mid-stage funding and the increasing focus on market-readiness for funding. The relief however is that M&A deals have picked up momentum post-2015 coinciding with the drop in funding activity in the startup space, turning into an exit route for some promoters and a major source of funding for others. Enterprises which can work on a combination of strong revenue models and continuously updated technological knowhow which ensures a great consumer experience will continue to attract investors."
Referring to a whopping 75 per cent growth in merger and acquisition (M&A) activity in the first quarter compared to last year in terms of number of deals, experts predict that after years and years of aggressive funding, the Indian startup sector is now exhibiting early signs of maturing. Some of the top deals that made headlines were: $130 million acquisition of Citrus Payments Solutions; the $41 million purchase of One Mobikwik, and the $31 million acquisition of ZipDial Mobile Solutions; and the $16 million acquisition of Local Cube Commerce.
However, according to industry experts, this significant growth in M&A activity could lead to more investor interest as it has been observed that late stage venture capitalists often see good value in bringing players together, increasing the economies of scale of the businesses, and then eventually floating possible public offerings.
According to the VCCEDge report, Bengaluru was the most active Indian city for startup activity in Q1 2017 and clocked in 40 deals worth $96 million. It was followed by Delhi NCR at second place which saw 38 deals going through worth $44 million.
Coming to sectors within the ecosystem, investors still seem to prefer money over food and travel. According to the report, Fintech continues to be the hottest sector for the Indian startup fundraising. The sector which covers financial technology services successfully netted 11 deals worth $18.5 million in the first quarter, and was followed by food tech at second position with 8 deals worth $11.1 million, and real estate tech coming in at third position with 2 deals worth $10 million.
The data from VCCEdge highlights that during the first quarter of 2017, the Indian startup ecosystem saw just 237 funding deals going through all the way. This 237 figure marks a 47 per cent decline from the number of deals that were locked in last year during the same period. Further, the data also revealed that the combined deal values have also plunged by 23 per cent to $165 million in the first quarter of 2017 when compared to the same period last year, and fell by a shocking 46 per cent from the preceding quarter. VCCEdge notes that the significant fall made the quarterly deal value the lowest in the period of over three years and it fell below the $300 million mark for the very first time in nine quarters.
Marking a not so good start of the year for the third largest ecosystem in the world, the first quarter of 2017 saw a decline in seed funding and angel funding, both in terms of value as well as volume. The number of early stage deals in the Indian startup ecosystem declined almost by 50 percent with just 120 deals going through the first quarter of 2017, when compared to the 245 deals figure in the same period the preceding year. Further, Series A funding rounds also saw a decline by 65 per cent in terms of deal value, while Series B rounds saw a 22 per cent increase in value even as the number of deals fell by 16 per cent.
There's a Positive Sign
While there is no denying the fact that the figures coming in from the first quarter are quite dismissal, but everything isn't lost. According to the VCCEdge report, even though the early stage funding deal numbers weren't so impressive, but the mid to late stage deals saw an upward trend, with Series B funding rounds growing by a good 22 per cent compared to the figures clocked in last year. In addition to this, the startups that still have their eyes set on profits and are working hard to achieve their targets continue being the favourites among investors.
According to Gaurav Roy, business head, VCCEdge, “A rise in Series-B funding even as seed and Series-A funding trends show a decline reflects investor cautiousness in early and mid-stage funding and the increasing focus on market-readiness for funding. The relief however is that M&A deals have picked up momentum post-2015 coinciding with the drop in funding activity in the startup space, turning into an exit route for some promoters and a major source of funding for others. Enterprises which can work on a combination of strong revenue models and continuously updated technological knowhow which ensures a great consumer experience will continue to attract investors."
Referring to a whopping 75 per cent growth in merger and acquisition (M&A) activity in the first quarter compared to last year in terms of number of deals, experts predict that after years and years of aggressive funding, the Indian startup sector is now exhibiting early signs of maturing. Some of the top deals that made headlines were: $130 million acquisition of Citrus Payments Solutions; the $41 million purchase of One Mobikwik, and the $31 million acquisition of ZipDial Mobile Solutions; and the $16 million acquisition of Local Cube Commerce.
However, according to industry experts, this significant growth in M&A activity could lead to more investor interest as it has been observed that late stage venture capitalists often see good value in bringing players together, increasing the economies of scale of the businesses, and then eventually floating possible public offerings.
What's Still Hot
According to the VCCEDge report, Bengaluru was the most active Indian city for startup activity in Q1 2017 and clocked in 40 deals worth $96 million. It was followed by Delhi NCR at second place which saw 38 deals going through worth $44 million.
Coming to sectors within the ecosystem, investors still seem to prefer money over food and travel. According to the report, Fintech continues to be the hottest sector for the Indian startup fundraising. The sector which covers financial technology services successfully netted 11 deals worth $18.5 million in the first quarter, and was followed by food tech at second position with 8 deals worth $11.1 million, and real estate tech coming in at third position with 2 deals worth $10 million.
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