With Indian startups working on building a stable and viable business model and India VC investors shifting focus on fundamentals, VC investment in India has rebounded in Q3’16 compared to Q2’16, said a Venture Pulse Q3 2016 report by KPMG and international and CB Insights.
Although investment dollars are still more than 75 per cent below the peak experienced in Q3’15, the quality of investments has increased dramatically as VC investors have focused on companies with clear business models and greater profitability potential, the report said. “A dearth of mega-rounds pushed India funding below $600 million in Q2’16, but Q3’16 saw the total rise above $1 billion once more. However, this is still well below the $3.4B figure of Q3’15,” it said.
“The investment environment in India is becoming stable with clearer business models emerging in the startup ecosystem. Though the speed of investments have not increased, we see a clear increased interest by investors in FinTech start-ups with O to O models which have better control in the ecosystem, as well as interest in the payments space,” Sreedhar Prasad Partner, E-Commerce and Startups, KPMG in India said.
“Interest in health-tech is growing too, particularly in technologies that are enabling higher quality primary care or more convenient healthcare delivery, such as new models of care, digital health screening, scheduling, and digital referral services,” he added.
Over the next few quarters, Series B and C deals in India are expected to increase as high-quality early-stage companies grow and seek out new funding, said the study.
However, Q3 saw a 14 per cent decline in funding and $24.1 billion invested across 1,983 deals globally, representing a very slight deal increase from the previous quarter, the report noted.
Although the deal volume is still quite healthy by pre-2014 standards, this was the lowest quarter of deal funding gloabally since Q3 2014.
“Caution may still be the name of the game in the traditional VC market, but it is not all doom and gloom,” National Co-Lead Partner at KPMG, Brian Hughes said. “There continues to be a lot of interest and activity coming from corporates who need to up their game when it comes to innovation, disruption and competition,” he adds.
Driven by fewer $100 million-plus mega-deals, global deal activity across North America, Europe and Asia fell flat in Q3 as funding trended downwards. After rocketing to a high of 25 new unicorns in the same quarter last year, 2016 has yet to see a quarter with double-digit companies entering the VC-backed unicorn club.