In the first six months alone of this year, the amount of capital pumped into the start-up industry has surpassed all of the inflow in 2014. This has made the country a welcoming stage for global funding names that are scouting for potential start-ups.
While the breakneck rate of deal-making is an exemplary display of the growing popularity and access of technology, it is also pushing down funding benchmarks as investors jostle to place bets on the next future unicorn company.
Venture capital investors funnelled Rs 15,600 crore, or $2.46 billion, into Indian startups this year till June 26, compared with Rs 14,850 crore, or $2.34 billion, in 2014. They closed 197 deals between January and now, as against 297 last year, at significantly higher average deal sizes.
“We have just seen a cycle where people are very excited to invest in India Internet, especially mobile, which has unprecedented availability of capital,” said Shailendra Singh, managing director at venture capital firm Sequoia Capital India.
Investors and entrepreneurs both hope that raising so much money kicks the competition out of the territory. However, the rate of growth should be very high, almost over 100% to raise these rounds. Entrepreneurs often say that their aggressive capital raise is a function of the scale that they are after.
Out of the many start-ups that have become established ventures, food delivery application Swiggy is a notable name. From January to May, the number of orders has grown by 25 times. The company plans to expand to 12 cities by the end of this year.
“Hyper-local deliveries are largely a city-centric concept and no one has expanded beyond 5-10 neighbourhoods or a city, let alone go across double-digit number of cities in one year. In order not to slow down and continue to scale, fundraising continues to be necessary,” said Swiggy’s CEO Sriharsha Majety. The Bengaluru-based company raised two successive funding rounds in less than seven months, Rs 12 crore and then Rs 105 crore earlier this month.
In the past 12 months, more than 60 tech start-ups have raised VC funds twice or more. With these sectors becoming vital points of an investor’s checklist, the entry valuations of early-stage consumer internet and mobile companies have surged 2-4 times in the past two years.
