VC investments dip 28% in 2016

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Venture Capital investments dropped 28 per cent in value and 21 per cent in terms of number of deals in 2016, after touching the peak level in 2015. Though IT and ITeS companies continued to take away the larger share of investments, the total funding for the sector fell by 17 per cent.

In 2016, venture capital firms made 405 investments worth $1.4 billion compared to 512 deals worth $2 billion in 2015, according to data from Venture Intelligence, which provides data on private company financials, transactions and their valuations. Venture Capital is defined by Venture Intelligence as Seed Round to Series D round of investments less than $20 million in size in companies less than 10 years old.

With 304 investments worth about $1 billion, the Information Technology and IT-Enabled Services (IT & ITES) industry retained its status as the favourite among VC investors during 2016, accounting for 75 per cent of the investments in volume terms and 69 per cent by value. Investment activity in this sector was down 17 per cent compared to 2015.

Among the top IT investments, cloud telephony company Knowlarity, online SME loans provider LendingKart and database software firm ScaleArc raised $20 million each while online pharmacy Pharmeasy raised $18 million and foodtech company FreshMenu raised $17 million. Within IT, while consumer Internet and mobile companies continued to be the main area of focus, VCs also invested substantially into Enterprise Technology companies, especially SaaS startups like Helpshift, Betaout and Zarget and B2B marketplaces (like Power2sme, ofBusiness and Just Buy Live.

Healthcare and life sciences were the distant second, attracting less than a tenth of investments attracted by IT companies. The sector raised 23 investments worth $129 million against 38 deals worth $236 million in 2015. Preventive healthcare company Curefit, founded by former Flipkart executives raised $15 million from IDG Ventures India, Accel India and Kalaari Capital, while dialysis service provider Nephroplus raised $15 million from Sealink Capital and IFC.

Food and beverages companies attracted 14 investments worth $57 million in 2016 compared to 18 investments worth $81 million in the previous year. Cremica Food Industries, which split from the family business of Bector Food Specialties, raised $15 million from Rabo Equity, while restaurant chain firm Azure Hospitality raised $10 million from Max Ventures and Morgan Stanley. Beverage companies attracted specific investor attention during 2016 with beer maker Bira 91 and fruit juice makers Raw Pressery and Good Juicery attracting capital.

Series A” rounds saw a 45 per cent fall in 2016 to 125 transactions compared to the 229 deals in 2015, the Venture Intelligence analysis showed. The action in the other stages was largely flat compared to 2015.

Bangalore based start-ups continued to top the funding charts with 130 investments, NCR-based companies inked 111 deals and Mumbai-based companies attracted 90 investments. With its mix of logistics tech and enterprise tech companies, Pune-based companies attracted 15 investments and pipped Chennai-based companies with 13 investments for the fourth place. “If there was one word that described VC investments in 2016 it was selectivity,” said Arun Natarajan, founder of Venture Intelligence.

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