Early-stage deals nosedive amidst slowing Indian economy

The last six months of 2019 looks promising as VC firms are in the process of closing fresh round of funds.

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After affecting major sectors such as auto, textile, and the job market in the country, India’s drooping economy is coming for the early-stage technology startups as the quantum of deals at seed and angel round has fallen to its lowest in the last five years.

A recent report by VCCEdge, the research arm of NewsCorp VCCircle, says in the first half of this year, seed and angel investments in early-stage companies have gone down from 312 deals in the first six months of last year to 193 deals this year in the same period. The number of deals under USD 5 million ticket size fell by 46% to 198 from last year’s 366 such deals.

Although funding in angel and seed round dried up in the first six months of this year, another report by Venture Intelligence says overall Indian tech startups raised a record USD 3.9 billion in the first half of 2019 ending June 30.

“The reality is that markets have been tight for a while now. When the core business suffers, people stop looking at discretionary spending which can make an impact on their alternative assets investment (such as angel investments or early-stage or VC funds) plans. The idea then is to come later,” Sasha Mirchandani, founder and managing partner at a VC firm Kae Capital, told local media Mint.

The Mumbai-based early-stage investment fund Kae Capital is reportedly in the process of raising USD 60 million for its third fund. Chiratae Ventures is soon going to launch a separate fund of USD 35 million to invest USD 500,000 to USD 1 million in startups looking for seed round.

A few other India-focused funds as well are raising money, hoping that the latter half of 2019 will see an increase in investment in early-stage companies. Mirchandani who has in the past invested in fashion e-tailer Myntra, ad-tech company InMobi and online marketplace Flipkart in his personal capacity, told Mint that most slowdowns last for about 18 months.

“We are 12 months into it already. It will be fine after six months, slowdowns are not permanent. There was never a better time for a good company to raise funds than today. There is enough capital available with institutional investors,” he said.