Startups in Tamil Nadu raised $439 million in the first nine months of 2020 across 22 deals. During the same period last year, State-based startups attracted Private Equity (PE) and Venture Capital (VC) investments to the tune of $1,331 million across 39 deals, according to data provided by Venture Intelligence, a research service focused on private company financials, transactions and their valuations.
Despite uncertainty in the market due to the COVID-19 pandemic, this quarter (Q3) witnessed six deals amounting to $108 million.
“While the PE-VC investment figures are down on a year-on-year basis, recent weeks have shown that both foreign PE-VC investors (notably, U.S.-headquartered investors like Falcon Edge Capital – which led the $4.5-million investment in Hippo Video) as well as well-established India-dedicated funds are keen to make new investment bets. This general ‘loosening of purse strings’ is likely to improve funding access for Chennai/Tamil Nadu-based companies as well,” said Arun Natarajan, founder of Venture Intelligence.
For the first nine months of this year, Tamil Nadu managed to get 17 angel investments. In 2019, the State had 11 angel investments for the same period. During this third quarter, the State saw seven angel investments while there were only 3 that came in during the same time last year. Mr. Natarajan explained that right now, owing to the impact of the pandemic, digitally native companies in edtech, fintech, entertainment and e-commerce sectors are attracting a lion’s share of PE-VC investments.
“Tamil Nadu-based companies in the financial services and fintech space are likely to attract more attention in the current environment.
"As investor confidence improves, startups in this region which are especially strong in the enterprise software and deep tech segment are likely to witness more investments flowing their way,” he added.
According to Mr. Natarajan, the vibrancy of the capital markets (including the very successful IPOs of Chennai-based CAMS and Bangalore-based IT Services firm Happiest Minds), should also encourage more mature companies from the region to look at the IPO route to raise capital. The analysis done by the Venture Intelligence team shows that at the national level PE-VC firms invested $26.3 billion across 547 deals in the first nine months of 2020.