E-commerce, internet remain investment hotspots in Indian startup ecosystem

iSpirt says 50% of 159 M&As in 2010-2014 in e-commerce, internet space

Even as the Indian start-up ecosystem has evolved over the last few years and entrepreneurs have experimented with several industry segments, the e-commerce and internet segments continue to be the hot-spots of software product industry in the country.

This reflects in the fact that 50 per cent of the 159 merger and acquisition (M&A) deals that took place in the software product industry since 2010 till May 2014, were in the e-commerce and internet segments, a report published by software product think-tank, Indian Software Products Industry Roundtable (iSpirt) and technology-focused middle market advisory boutique Signal Hill showed.



In value terms, 51 per cent of the around $1.78 billion that was spent on M&A activity in the software product space in India went to these two segment, the report said.

The e-commerce and internet players were also frontrunners in receiving investments from private equity (PE) and venture capital (VC) funds.

"Investment in e-commerce and internet & consumer has grown by around seven times between 2010 and 2013 and continues to grab a lion's share of the VC/PE investment dollars," the report said. The report named e-commerce majors like Flipkart, Myntra and Snapdeal among the leaders in receiving marquee investments.

The report, titled "India Technology Product M&A Industry Monitor Report, also showed that in volume terms, domestic transactions accounted for 70 per cent of the M&A activity, however, in value terms the acquisitions made by overseas players accounted for 63 per cent of the total transactions.

The report also said that while it was encouraging to see the increasing trend in overall technology product M&A deals in India, the Indian M&A eco-system is still in the early stages as compared with those of the US and Israel. The VC and PE investments in Israel from 2010-13 was half ( around $1.5 billion) that of India (around $3 billion), but the total M&A deal values in the country during this period was over six times the M&A transaction value seen in India. The average M&A transaction in Israel was much higher at around $100 million as against around $11 million in India.

"In the Silicon Valley, technology M&A exits provide liquidity to all the stakeholders in the ecosystem and help enable the next generation of tech startups," said Sanat Rao, who leads iSPIRT's M&A Connect Program, an initiative dedicated to facilitating and expediting the cross-border M&A process for Indian software product companies. "For the Indian product startup ecosystem to flourish, it is critical to us to drive up the level of technology product M&A transactions."

 

--Ends