Internet firms see slower fund flows with just $480 million coming in 3 months

Last month, Byju’s raised a small amount from US-based Bond, driving up the ed-tech firm’s valuation to an estimated $10.5 billion.

It’s been a dull three months for India’s internet consumer companies with just $480 million of capital coming in; that’s a fall of 60% over the $1.27 billion seen in the June, 2019 quarter. Data sourced from researcher Tracxn showed the amount is also considerably lower than the over $2 billion that companies raised in the March quarter.
Investors appear to have put fresh commitments on hold while assessing the impact of the pandemic while making sure firms have enough money to survive. The next round of big infusions would depend on how deftly companies are able to tweak their business models in the new challenging environment, Atit Danak, principal at Zinnov Management Consulting, said. After all, even the best of the players — in spaces such as food delivery, mobility and hospitality — have been hit badly.

There could be some hiccups with regard to infusions by Chinese investors, though the impact is not expected to be severe, given these investments while significant, are not also huge. “The most consistent investors in Indian start-ups are the Western countries and Japan,” Danak said.

Satish Meena, senior analyst at Forrester Research, expects the pace of funding to pick up only in around January next year. “While there could be several deals, the ticket sizes will be small for the rest of the year,” Meena said. He’s predicting a consolidation in the e-grocer space with the entry of JioMart and believes companies like Snapdeal and Paytm Mall may not get much investor support.

To be sure, there are some robust business models which will continue to draw investors’ attention even if sectors such as real estate are subdued right now. As Danak pointed out, Airbnb registered a surge in bookings in the US after the lockdown was eased.

Last month, Byju’s raised a small amount from US-based Bond, driving up the ed-tech firm’s valuation to an estimated $10.5 billion. Swiggy raised about $43 million in April as part of its ongoing funding round while grocery delivery company Milkbasket also managed to attract an investment of $5.5 million.