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Seed & Series A investments providing strong support to Indian Startup Ecosystem: Report

 

Despite the many macroeconomic headwinds, the Early Stage funding environment in India - specifically Seed and Series A investments - continues to be vibrant. According to Venture Intelligence data, 250 companies raised Series A investments during 2021 - up 75% from 142 companies in 2020. Seed and Series A investments were up by 88% and 22% respectively in the Jan - Mar 2022 quarter (over the same period in 2021). (Even in the ongoing quarter – even as late stage funding has started to slow down significantly – the pace of Early Stage investments have held up.) What explains the resilience in Early Stage funding? And, will the vibrancy last? The first edition of a new report series from Venture Intelligence – The Series A Landscape Report – provides scope for optimism. Some of the data highlights from the report: Series A Investments: • The number of companies raising Series A rounds grew at a brisk CAGR of 19% in the four year period from 2017 to 2021. • E-commerce was the most preferred sector for Series A investments during 2015-2021 period, followed by SaaS, Fintech, Healthcare (including Healthtech) and Food & Beverages (including D2C brands). • The most active Series A investors during 2018-2021 included Sequoia Capital India (with 79 such investments), Accel India (46 investments), Matrix Partners India (28), Beenext (28), Blume Ventures (27) and Elevation Capital (26). • Sequoia Capital India and Accel India had invested in 63% of their Series A investee companies as part of their seed rounds (excluding companies that raised a direct Series A round). • IAN Fund (88%), India Quotient (86%) and Blume Ventures (80%) had the highest ratio of follow on participation in Series A rounds (for startups which they had Seed funded). Seed Investments: • The 2015-2021 period witnessed an average of 540 seed deals each year, shooting up sharply to 756 deals in 2021. • SaaS was the most preferred sector for seed investments (during 2015-2021) followed by E-commerce, Fintech, Healthcare (including Healthtech) and Edtech. • The Top Seed Investors during 2018-2021 included Sequoia Capital India (88 startups), Axilor Ventures (49 startups), Accel India (48), 3one4 Capital (41), Blume Ventures (39) and India Quotient (36). • Startups from Bangalore were the most favored by investors – both in the Seed and Series A segments - during the 2015 2021 period, followed by startups from National Capital Region and Mumbai. Venture Capital Funnel A Key Highlight of the Report is the "Venture Capital Funnel" that shows the fraction of companies that have "graduated" from receiving Seed investments to Series A investments and from there to Series B investments and beyond. Of the 2,848 companies that raised Seed investments during the 2015-2021 period, only 18.1% (516 companies) progressed to the Series A Round. And, from those 516 companies (that raised Seed and Series A rounds during 2015-2021), 174 companies (33.7%) went on to raise the Series B round. Of the 174 companies, 76 companies (43.7%) went on to raise the Series C round. Almost a third of the companies that raised a Series C round (32.9% or 25 companies) managed to raise subsequent rounds during the period of study. The Report also highlights “Pipeline Creators” – investors that make seed investments that are relatively more successful in raising Series A investments. Sequoia Capital India was the Most Active Series A pipeline creator in the 2018-2021 period, with its Seed investments in 35 companies that went on to raise a Series A round. Sequoia was followed by Blume Ventures which had backed 20 such companies and India Quotient that seed funded 19 such companies. “Series A is the crucial link between a vibrant seed stage and a mature late stage VC ecosystem. But there is very little data on this. This report by VI is a timely spotlight on an important metric that founders and investors should pay more attention to,” said Ganapathy Venugopal, CEO of Axilor Ventures. “Tech companies have a gestation period, and now there is more capital available to provide…runway to these young companies. This is a good thing for India,” said Pranav Pai, Founding Partner, 3one4 Capital as part of an Economic Times article based on the report.