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India gains Global VCs’ confidence in 2021

In value terms, $19.5 bn in VC funds came into India in the nine months to September this year, of which $9.9 bn came in the July-Sept quarter, says CB Insights.

For the venture capital (VC) space in India, the year 2021 has been a good one so far. According to start-up data tracker Tracxn, about 211 funds made their debut investments in India this year; that’s 64 more than those in the previous year. Many biggies who had stayed away from India, has entered the country. These include Andreessen Horowitz, TCV, Vitruvian Partners, and GSV Ventures.

In value terms, $19.5 bn in VC funds came into India in the nine months to September this year, of which $9.9 bn came in the July-Sept quarter, says CB Insights.

There are many reasons for this burst of interest in India by VCs from the West. The government of China’s crackdown on some of its big tech and e-commerce companies has taken the sheen off that market for global VC and private equity (PE) companies. The natural next choice is India. There are a number of factors that put India in good light to these VCs. One, is the strong equity markets, which afford them the opportunity to exit their investments at good valuations. Second, is the swift and seamless adoption of online mode of delivering and accepting services by the people in India in these Covid times. That has speeded up commerce, and given life to a whole lot of innovative start-ups in the country. Third, is India’s world-class IT strengths. And of course, it’s all of these couldn’t have got the required results if it hadn’t been for the trillions of dollars injected into the global economy at near zero interest rates by the US and other major economies, and which have found their way into these investment vehicles.

India has a thriving VC space consisting of home-grown companies. According to one count, the country is home to about 800 VC players. But for a country of India’s size and burgeoning start-up ecosystem, spanning practically all sectors of the economy, with players hailing from all over the country — small towns to its bustling metros — and looking for dollops of funds, they need to look to VC players with deep pockets and the mental make-up to stay invested for a long period of time, among many other qualities.

That’s where VC companies from the West come into play. Take the cases of Tiger Global and SoftBank. Tiger Global entered India with just 2 investments in 2005. The next year, there was none. Followed by 5, 2, 3, 3, 12, 7, 10, 17, and 38 (till 2015) in the next consecutive years. These numbers go to show the investing patience shown by the VC company and its conviction in the small number of start-ups it committed its funds to. And have their investments paid off! Flipkart, Ola, Quikr, Hike, Shopclues, Cred, PharmEasy, Vedantu, BharatPe, and ShareChat are among the Unicorns and Exits that Tiger Global has been able to achieve since their entry into India.

SoftBank too, has shown phenomenal patience and the capacity to stay invested – and participate in further rounds of investment — in its portfolio of start-ups. Starting with investments 2 companies, SoftBank has now racked up investments worth $7 bn (committed) till now. And with many Unicorns and Exits that include Flipkart, InMobi, Snapdeal, Policybazaar, Paytm, Ola, Delhivery, Oyo, Grofers, and PropTiger, it is sitting pretty in India.

For homegrown start-ups, besides the deep pockets and the long years of patience that these VC funds from the West offer, they can also benefit from bigger go-to markets, greater visibility, and global best practices. For homegrown start-ups to aspire to become global players all these three are essential. They bring size, acceptability in the eyes of global consumers, vendors and other stakeholders, and a growth trajectory that they can never expect if they were to be constrained to India.

Last, but not the least, these VC funds from the West adopt a time-bound approach to their investments. So, the start-ups that approach them are not kept hanging fire on one pretext or the other. Timely execution (or rejection) allows the start-up to get on with its work sans unnecessary delays. In the start-up world, that one factor can make all the difference between succeeding and failing.

Source: Business World

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