ET Bureau MUMBAI: A rush of money is flowing to a select set of emerging businesses as venture capitalists jostle for the best in India’s fast growing startup market. Nearly half a dozen areas like ecommerce ancillaries, mobile internet, big data, technology-enabled services and makers of software products, are set to grab a lion’s share of risk capital funding in the coming year.
A surge in online retail, a vibrant startup industry –– where at least two new ventures are set up every day –– and the backing of a new business-friendly government are fuelling the confidence of investors willing to pay top dollar for best-in-class companies.
“India is not just a story but consumption is real,” said Rajesh Raju, a managing director at early stage investment firm Kalaari Capital which has already closed five deals this year in startups like online jewellery retailer BlueStone and data analytics firm Germin8.
“E-commerce was seen as hype but looking back (early) investments in companies like Snapdeal and Flipkart appear cheap,” said Raju whose fund is an initial investor in Delhi-based Snapdeal, which has grown into one of India’s largest online marketplaces with sales expected to touch $1 billion by end of the year.
Anxious to spot the “next new thing” investors are hunting in sectors ranging from taxi aggregation to online grocery, mobile content and realty portals. Their keenness is proving to be a boon for young companies that are receiving a lot of money at very attractive rates.
Last week, taxi-aggregation services portal Olacabs raised about Rs 250 crore in a deal which valued the company at nearly Rs 1,100 crore, nearly 40% more than the valuation it was offered a few months ago according to people privy to the deal. More deals are in the works according to several industry members. Online grocery portal BigBasket is close to raising up to Rs 240 crore in a round expected to value the company over Rs 600 crore. TV and online shopping player Naaptol is also raising about Rs 240 crore.
“When markets become bullish, sensitivity around valuations tends to reduce,” said Aashish Bhinde, an executive director at investment bank Avendus Capital.
Event ticketing portal BookMyShow also saw its valuation triple to Rs 1,000 crore when it raised Rs 150 crore in June this year as compared to a previous round in 2012.
“A lot of the cheques which seem to be coming at a high valuation right now are being done on the premise that these companies can be worth billion dollars,” said Rajan Mehra of Nirvana Venture Partners. It has backed firms like online gaming portal Games2Win and product review portal Reviews42, which recently rebranded to Zopper and raised about Rs 30 crore from Tiger Global.
This year over Rs 3,600 crore has been invested in startups with technology ventures accounting for half the number of deals and a third of the total amount invested.
Coming in next are retail and consumer services ventures and healthcare which also are hot favourites among investors.
“A positive outlook on the economy, sustained growth of internet and (online) payment are driving increased venture investments in India,” said Kanwaljit Singh, a senior managing director at Helion Venture Partners which manages a corpus of Rs 3,600 crore. This year the fund has already closed six investments in companies like online property listing start-up Housing.com, online test preparation firm Toppr and enterprise mobility company RapidValue.
Investors are of the view that unlike the past two years when e-commerce bagged the bulk of risk capital –– CB Insights said that the sector attracted 72% of the total $1.3 billion (Rs 7,800 crore) in tech funding over last 12 months –– this year will see a broadening of the portfolio.
Other verticals like “classifieds, ticketing, travel” will receive funding according to Avnish Bajaj, a managing director at Matrix Partners India, who also expects a deepening of the e-commerce theme leading to investments in allied sectors.
“Logistics and education are areas of great interest to us,” said Vikram Godse, managing director of the Indian arm of Silicon Valley investment firm Mayfield which raised a new early stage fund of Rs 650 crore in February.
“The risk appetite has opened up now. They (investors) believe that software companies can build products in India and sell it globally,” said Anand Jain, startup Wizrocket which recently raised seed funding from Accel Partners.
A surge in online retail, a vibrant startup industry –– where at least two new ventures are set up every day –– and the backing of a new business-friendly government are fuelling the confidence of investors willing to pay top dollar for best-in-class companies.
“India is not just a story but consumption is real,” said Rajesh Raju, a managing director at early stage investment firm Kalaari Capital which has already closed five deals this year in startups like online jewellery retailer BlueStone and data analytics firm Germin8.
“E-commerce was seen as hype but looking back (early) investments in companies like Snapdeal and Flipkart appear cheap,” said Raju whose fund is an initial investor in Delhi-based Snapdeal, which has grown into one of India’s largest online marketplaces with sales expected to touch $1 billion by end of the year.
Anxious to spot the “next new thing” investors are hunting in sectors ranging from taxi aggregation to online grocery, mobile content and realty portals. Their keenness is proving to be a boon for young companies that are receiving a lot of money at very attractive rates.
Last week, taxi-aggregation services portal Olacabs raised about Rs 250 crore in a deal which valued the company at nearly Rs 1,100 crore, nearly 40% more than the valuation it was offered a few months ago according to people privy to the deal. More deals are in the works according to several industry members. Online grocery portal BigBasket is close to raising up to Rs 240 crore in a round expected to value the company over Rs 600 crore. TV and online shopping player Naaptol is also raising about Rs 240 crore.
“When markets become bullish, sensitivity around valuations tends to reduce,” said Aashish Bhinde, an executive director at investment bank Avendus Capital.
Event ticketing portal BookMyShow also saw its valuation triple to Rs 1,000 crore when it raised Rs 150 crore in June this year as compared to a previous round in 2012.
“A lot of the cheques which seem to be coming at a high valuation right now are being done on the premise that these companies can be worth billion dollars,” said Rajan Mehra of Nirvana Venture Partners. It has backed firms like online gaming portal Games2Win and product review portal Reviews42, which recently rebranded to Zopper and raised about Rs 30 crore from Tiger Global.
This year over Rs 3,600 crore has been invested in startups with technology ventures accounting for half the number of deals and a third of the total amount invested.
Coming in next are retail and consumer services ventures and healthcare which also are hot favourites among investors.
“A positive outlook on the economy, sustained growth of internet and (online) payment are driving increased venture investments in India,” said Kanwaljit Singh, a senior managing director at Helion Venture Partners which manages a corpus of Rs 3,600 crore. This year the fund has already closed six investments in companies like online property listing start-up Housing.com, online test preparation firm Toppr and enterprise mobility company RapidValue.
Investors are of the view that unlike the past two years when e-commerce bagged the bulk of risk capital –– CB Insights said that the sector attracted 72% of the total $1.3 billion (Rs 7,800 crore) in tech funding over last 12 months –– this year will see a broadening of the portfolio.
Other verticals like “classifieds, ticketing, travel” will receive funding according to Avnish Bajaj, a managing director at Matrix Partners India, who also expects a deepening of the e-commerce theme leading to investments in allied sectors.
“Logistics and education are areas of great interest to us,” said Vikram Godse, managing director of the Indian arm of Silicon Valley investment firm Mayfield which raised a new early stage fund of Rs 650 crore in February.
“The risk appetite has opened up now. They (investors) believe that software companies can build products in India and sell it globally,” said Anand Jain, startup Wizrocket which recently raised seed funding from Accel Partners.
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