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Startup investors writing more $100 million cheques this year

With the rush of capital and new types of investors coming in, venture capitalists said the time taken for startups to grow their business and rack up $100 million in funding has also shrunk over the past few years.

, ET Bureau|
Updated: Dec 06, 2019, 11.00 AM IST
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Concurrently, there has also been a roughly 40% drop in the pre-$5-million investment market, to 682 deals, the data show.
Bengaluru: Late-stage investors are becoming more bullish about doubling down on category leaders in the startup world, with the number of investment rounds that have topped $100 million increasing by 40% so far this year.

There have been 45 such deals in 2019 compared to 32 a year ago, data collated by industry tracker Tracxn show. Several large and diverse set of investors have bet on Indian startups this year. These include micro-blogging platform Twitter investing in homegrown social media startup ShareChat, global social media leader Facebook backing Meesho, US-based eBay pumping cash into ecommerce platform Paytm Mall and Indonesian multiservice platform GoJek’s bet on cloud kitchen company Rebel Foods.

At the same time, China’s internet behemoth Tencent has also made three large investments this year — in the Times Internet-owned OTT streaming provider MX Player, insurance aggregator and fintech startup PolicyBazaar, and B2B marketplace Udaan.

Masayoshi Son-led SoftBank has invested in ride-hailing company Ola’s electric vehicles unit Ola Electric, PolicyBazaar, grocery startup Grofers, logistics player Delhivery and hospitality major Oyo Rooms in a mix of old and new portfolio bets.

With the rush of capital and new types of investors coming in, venture capitalists said the time taken for startups to grow their business and rack up $100 million in funding has also shrunk over the past few years.
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“The Indian market has demonstrated that companies can scale faster, provided they have the resources. In the past, companies could not scale faster even if they had money, because the adoption of new products was slow and consumption levels were lower,” said Rutvik Doshi, managing director of early-stage venture capital firm Inventus Capital India.

The total investment into the Indian startup market has risen by 27% to $18.6 billion so far this year, even as the number of private market deals has fallen by about one-fourth to 1,264.

Sustainable Growth
Concurrently, there has also been a roughly 40% drop in the pre-$5-million investment market, to 682 deals, the data show. “This is a clear indication of the maturity of the Indian startup ecosystem,” Doshi added, a sentiment shared by founders of several startups.

However, some of these founders told ET that investors were focusing on sustainable growth and were being prudent about cash burn after US-based ride-hailing company Uber — touted as the flagship of the gig economy globally — plunged after a bearish opening following its listing on the stock exchanges.

The Uber stock, which was priced at the lower end of its IPO range, has dropped 40% over the last six months. “Global investor interest in India is largely due to fundamental factors like the introduction of UPI (Unified Payments Interface), GST (Goods and Services Tax), and rising internet penetration… coupled with weak global markets, making India a good macro bet,” said an entrepreneur who raised a $100 million-plus round earlier this year.

“While the interest is great, conserving to increase your runway is even more critical as the next 18 months will be all about demonstrating strong business fundamentals,” the entrepreneur, who did not wish to be named, said.

Investors said access to digital infrastructure is now a given, with 600 million internet, 400 million active social media and 150 million transacting users online.

“If we look at the next 10 years, there will be more and more users coming online...we believe that tech companies have started so small in each of their segments that most of the growth will be captured by a shift in demand from existing (traditional) way of doing business to a new (online) way,” Abhinav Chaturvedi, partner at venture capital firm Accel India said.

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