No fireworks for seed stage startups, VC investments fall since last Diwali

Priyanka Sahay

Moneycontrol News

Investor sentiment for small ticket investments amounting from Rs 30 lakh to Rs 1 crore fell to at an all-time low in India even as companies such as Flipkart, Ola and Paytm have raised billions of dollars during 2017.

Recent data shows that early stage startups continue to face the wrath of a market scenario marred by sluggish funding, rapid change in government's economic policies and skeptic domestic investors.

According to Bangalore based data tracker firm Tracxn, early stage deals of USD 2 million or below show a dismal figure at just 262 deals in 2017 till September, less than half of 607 deals in 2016.

Many early stage investors are awaiting for their portfolios to mature and show results before making newer bets, investors say. Several startups have gone down under.

“Lack of exists is a huge factor behind this slowdown. We haven’t seen great Series A or B rounds happening. Most of the investors (in early sgate game) have now left,” said Sanjay Mehta, angel and private equity investor however added that even though the momentum has decreased, good deals are still happening.

Investors such as Accel Partners, VentureEast and IndiaNivesh were among the ones who made early bets across startups such as GlowRoad, Kissht and Innefu, among others, respectively.

“A lot of the investors are holding their hands back because, they have already invested enough, over a period of time and waiting for some returns from their portfolio companies,” said Harshad Lahoti, cofounder of ah! Ventures.

In 2016, the Indian startup sector reported 176 deals in the bracket of USD 5 to 30 million against 113 deals reported till September 2017.

Late stage deals fare better

However late stage deals fared better in India, especially for companies which have raised a .

About 34 late stage deals with round sizes upwards of USD 50 million took place in just the first nine months of 2017 against about 40 deals in 2016.

Japanese firm Softbank was the prime driver of the late stage funding scenario in India in 2017.

Out of Softbank's major bets, Bangalore based Flipkart raised USD 2.4 billion. Noida based Paytm also raised about USD 1.4 billion dollar in May from Softbank.

In October, Ola too raised USD 1.1 billion (again from Softbank) and is expected to close another round with USD 1 billion more funding coming in.

According to the Tracxn data, even though the deals between USD 5 million to 30 million in 2017 remained lower than the previous year, the statistics was better than early stage deals.

Recently, Tracxn also reported that just about 800 new startups were launched in India in 2017 as compared to over 6,000 in 2016.

priyankla.sahay@nw18.com