Early-stage funding rounds for startups have almost doubled in the last two years on account of increased foreign capita, growing traction by entrepreneurs and evolved technology being used across sectors to grow companies faster, bigger and better.
Roopa Kudva, Managing Director with impact investor Omidyar Network India says that specifically there's a lot more Chinese fund chasing companies today. That includes Fosun RZ Capital, CDH Investments GGV Capital, Tencent Shunwei Capital, and Morningside Venture Capital and according to market research by Tracxn which tracks start ups and funding, India saw investments of up to $1.31 billion as of November 2019 up from just $65 million in 2017. "The other driver is that as the landscape has evolved, investors have become much more focused on unit economic, monetisation, and profitability than five years ago when it was just growth that was being chased," Kudva adds.
Archana Hingorani, Managing Partner with early stage venture fund Siana Capital agrees with Kudwa and says that its clear that funding rounds have grown in value over the last couple years. "My sense is that two things are happening. It's no longer just about Fintech plays for VCs and investors. The second is there is a need across the board for any business model to improve with the incorporation of technology and that doesn't matter how you define it whether it is software, AI, or machine learning.
Take healthcare for example, everything on it is being overhauled as we speak, and that leads to a large appetite for capital."
Omidyar, for example, has invested in Healofy a pregnancy and parenting app that caters to parents in regional languages and just announced another investment in Axio, a medtech venture that uses military-grade technology to stop bleeding immediately.
The other push is coming from the fact that there are far more established entrepreneurs in India today hitting the next venture button then five years ago. Examples include Freecharge Chairman Kunal Shah who then started CRED, former Myntra Founder Mukesh Bansal who started Cure.fit, former Ibibo founder Ashish Kashyap who started INDwealth, and Sachin Bhatia the former co-founder of MakeMyTrip who co-started Bulbul.tv. "Once an entrepreneur has had a track record of success, it automatically allows for the next venture to be capitalized and funded at higher levels," Kudva adds.
In addition, while several ventures that were backed by PEs and VCs earlier on were copycats of international businesses and that include Flipkart, Ola and more today the model is about looking to build businesses that solve India-specific problems. For example, RailYatri an indian travel marketplace site provides information on which platform is crowded what the chances are of a ticket being confirmed and more. In essence concepts that don't apply overseas.
Sandeep Murthy, partner with venture capital firm Lightbox, a company which backed companies Bombay Shirt Company, and Rebel Foods says that the trend isn't limited to India. "I would argue that its a trend happening globally and is a because of a mix of things," he says. "What a company used to need has all gone up: cost of customer acquisitions, cost of efficiencies in technologies in and the cost of managerial talent." A product head whose annual cost was Rs 50 lakhs three years ago is now between Rs 70 lakhs and Rs 80 lakhs.
"In essence, the start up ecosystem has matured and there is a sense of confidence and I'd even go so far as to say that we may not all know it yet but are in transition phase from the large older businesses houses to the newer-age tech driven ventures of tomorrow."
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