Indian start-ups raised $5.5 billion (Rs 36,000 crore) from venture capital (VC) firms and angel investors in 1,096 deals during 2015, as they looked to participate in the country’s economic growth story, according to VCCEdge, the research arm of online publisher VCCircle that tracks start-up funding. Nearly two-thirds of the investments or 632 deals were made by angel and seed investors, pitching in with small funding in the initial stage of the start-ups. Angel and seed investors funded $313 million in 2015. VC investments stood at $5.18 billion in 464 deals, said the study reported on techcircle.in. In fact, there was an investment in an Indian start-up every eight hours.
The share of private investments contributed by angel and VC firms in India rose to 25.4 per cent in 2015, compared to 17.2 per cent during 2014. Private equity investments in India clocked in at $11.8 billion, lower than its peak of $12.5 billion in 2012. A higher-than-ever number of Indian start-ups raised money for the first time in 2015 — 695 deals involving companies that had never raised capital before were completed this year, compared to 374 deals in 2014. Even more interesting is the growth of the number and total deal value for follow-on investments in 2015. There were 66 deals worth $189 million in the year, compared to 15 deals worth $15 million in 2014, signifying that the gap between funding rounds raised by start-ups is getting closer. Follow-on investments are those made within a year of a company raising its initial seed capital.
The news of healthy growth on the investment front in the Indian startup space comes despite a funding crunch in the market, fuelled by investors cracking the whip on startups that were burning cash to grab eyeballs.
In October, Nikesh Arora, vice-chairman of Japese VC firm SoftBank which has made some of the most big ticket investments in Indian startups, warned Indian startups that they should focus on building good products rather than funding their own growth.