The capital deployed by the Venture Capital funds in Indian startups reached a whopping USD 10 billion in the year 2019. This is 55 per cent more than the previous year and the highest capital deployment ever in the Indian startup ecosystem.
These findings are a part of the report 'India Venture Capital Report 2020' by Bain & Company and Indian Private Equity and Venture Capital Association (IVCA).
The amount of capital deployed was due to the increase in deal size across all funding rounds and the boost in deal volumes. There were almost 30 per cent more investment rounds in 2019 over 2018. What is interesting is that the seed and early stage deal size also increased in 2019 due to rising competition among Venture Capitals (VCs) to find the next big unicorn in India. Over the years, several seasoned professionals have also made the entrepreneurial leap which has improved the quality of founding teams.
The VC exit momentum in 2019 was in line with 2018, with secondary sales leading the mode of exits in India. The average exit value was USD39 million, says the report.
The Indian VC industry has passed through three distinct phases in the last ten years. Between 2011 and 2015 the industry saw a rapidly evolving startup environment, with investors feeling positive about the expansion and scaling of first-generation startups. This was followed by a phase of maturity and moderation between 2015 and 2017 with fewer, but higher-quality investments. Since 2018, marquee exits have renewed investor confidence.
Consumer tech, Software/SaaS, fintech and B2B commerce and tech remained the flavour of the season and saw 80 per cent of the VC investments in 2019. Within these sectors, most of the investments went to consumer tech.
While India-focused VC investments raised less funds at approximately USD2.1 billion in 2019, slightly lower than 2018, the fundraising outlook for 2020 remains positive among both LPs and GPs.
India has one of the top five start-up ecosystems in the world which continued to grow rapidly. Between 2012 and 2019, the number of startups have grown by 17% each year, while funded startups have shown a compounded annual growth of 19% during the same period. Among funded startups in India, typically 25% or more go on to raise subsequent rounds.