India Bucks Bigger-Is-Better Trend as Smaller, Fewer Deals Cause 27% Drop in VC Investment in Q1
May 22 2008 - 6:30AM
PR Newswire (US)
Dow Jones VentureSource Finds VC Investment in India Falls to $99
Million as Deal Flow Remains Steady; 67% of All Investment Went to
Consumer/Business Services Sector BANGALORE, MUMBAI and NEW DELHI,
India, May 22 /PRNewswire/ -- While the size of venture capital
deals grows in the U.S., Europe and China, venture capitalists
continue to do more thrifty deals in India, according to the
Quarterly India Venture Capital Report released today by Dow Jones
VentureSource (http://venturecapital.dowjones.com/), the premier
data provider for the venture capital industry. The median size of
a venture investment in an India-based company in the first quarter
of 2008 was $4.1 million, down from $8.3 million in 2007 and well
below the medians seen in the U.S. ($7.1 million), Europe ($4.5
million) and China ($10 million) in the first quarter. Overall, the
region attracted $99 million in venture investment with 16 deals
completed, a 27% drop from the fourth quarter that saw a record
$135 million put into 17 deals. "Venture investment in India did
see a drop in the first quarter from the fourth quarter but it's
not really accurate to compare this year's first quarter to the big
spike we saw in the first quarter of 2007 when $513 million was put
into 37 deals," said Jessica Canning, Director of Global Research
for Dow Jones VentureSource. "Our data shows that deal activity in
India remains steady and the drop in investment during the first
quarter is simply a result of smaller deals, not an overall
pullback." The report found nearly 67% of all venture investment in
India -- some $67 million-went to seven consumer/business services
companies. The largest deal in this area was the $26 million third
round for ClearTrip Travel Services, based in Mumbai. The data
showed that India's health care industry is still in its infancy,
as only two biopharmaceutical deals totaling $11 million closed in
the first quarter. The information technology (IT) industry
generated six deals in the first quarter, raising $19 million. The
software sector was the most popular IT area, as it accounted for
three of the deals and $10 million. Ms. Canning added: "While other
regional markets are weighed down by capital-heavy industries like
health care and energy, India's modern economy is still in its
infancy and everyday services like printing and travel booking are
in high demand-and it takes relatively little capital and time to
develop these kinds of companies." In fact, of the 16 deals
completed in the first quarter, 10 were for companies already
shipping products and generating revenues while another three were
for companies with established profitability. Together, they
accounted for 90% of India's quarterly investment. The report also
found that while first rounds made up half of all deals done in the
first quarter with eight, nearly 52% of all capital went to five
later-stage deals. The Quarterly India Venture Capital Report
covers venture capital investment specifically, which Dow Jones
VentureSource defines as growth capital made available to
entrepreneurial companies in exchange for ownership in the form of
private securities. These investments are often seen as
shorter-term and do not include private equity investments such as
leveraged buyouts or mezzanine and debt financing. For more
information or to request a demonstration of Dow Jones
VentureSource, visit http://venturecapital.dowjones.com/ or call
866-291-1800. The investment figures included in this release are
based on aggregate findings of VentureSource's proprietary Indian
research and are contained in VentureSource. This data was
collected by surveying professional venture capital firms, through
in-depth interviews with company CEOs and CFOs, and from secondary
sources. These venture capital statistics are for equity
investments into early-stage, innovative companies and do not
include companies receiving funding solely from corporate,
individual, and/or government investors. No statement herein is to
be construed as a recommendation to buy or sell securities or to
provide investment advice. ABOUT DOW JONES Dow Jones & Company
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