Jan to Sep VC investments down nearly 17 per cent YoY to $6.5 billion

Venture Capital investments dropped by around 17 per cent during January to September 2020 to $6.5 billion from $7.9 billion, last year. The funding was led by education, real estate and fintech. Investors say investment activity will increase in the coming months as Covid-19 has opened several new and first time opportunities for startups with fast changing consumer habits. Fintech, edtech and consumer driven startups are likely to raise more funds and grow faster.

Venture Intelligence data shows, with nearly $1 billion fund raise, Byjus Classes topped the table in 2020. The company raised the money in four tranches from various investors including TPG Capital, Tiger Global, ChrysCapital, Silver Lake, Owl Ventures, Sands Capital, General Atlantic and others. Oyo Rooms raised $507 million from SoftBank Corp. Unacademy raised raised $153 million from SoftBank Corp, IIFL VC, Nexus Venture Partners, Sequoia Capital India, General Atlantic and others. TPG Capital, Tiger Global, ChrysCapital, others have invested $ 225 million in Dream11.com and Samsung Ventures, Korea Investment Partners, Wellington Management, Naspers, Tencent and others $153 million in Swiggy.com.

Education topped the table with nearly $1.755 billion as against $379 million last year, followed by real estate which received $754 million as against $242 million, followed by Fintech $730 million ($1224 million), E-commerce $571 million ($2321 million), Food $522 million ($517 million), Healthcare $433 million ($577 million) and Logistics $366 million ($875 million), according to Venture Intelligence data.

Apoorva Sharma, co-founder and President, Venture Catalysts said, India is currently the third largest startup hub in the world and continues to attract a lot of VC and PE investors due to its comparatively faster growth rate, population and young demography. The country is home to over 50,000 startups and 34 unicorns that itself speak volumes about the high investor sentiment in this country’s startup ecosystem.

"We expect the investment activity to heighten in the coming months as Covid-19 has opened opened several new and first time opportunities for startups as the consumer habits are fast changing. Fintech, edtech and consumer driven startups are likely to raise more funds and grow faster. We also expect a new found interest from the investors in the SaaS segment as more and more businesses are looking to move online and adopt digitalisation following the Covid debacle," said Sharma.

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Pranav Pai, Managing Partner at 3one4 Capital added, growth capital has certainly resumed taking positions across sectors over the last quarter.

"We are observing a significant flight to quality now, and the top companies in every segment being tracked by global investors in India are seeing renewed inbound interest. The pandemic has acted as a universal filtering event and companies that are coming through stronger - with better utilisation, greater growth rates, higher margins, and increased staying power - are able to close funding rounds much more efficiently than before," said Pai.

The digitisation of these segments has accelerated measurably, and this is the trend being captured by the market-leading startups. If these companies are able to sustain market share post this expansion and establish their new positions quickly, this could end up becoming a defining moment for most of them.

Most of the growth sectors that have benefitted from this acceleration - consumer services such as groceries, select consumer brands, edtech, SaaS, payments and fintech infrastructure, gaming & entertainment, etc. - will be the beneficiaries of this investment interest. The acceleration of growth and a clearer path to scale economics (revenue, margins, and sustainability) are the more important drivers of this interest, added Pai.