In indications that investors were getting increasingly cautious while funding for start-ups in India, there has been a sharp dip in the number as well as the value of such deals in the start-up space in the first quarter of 2017 in comparison to the previous year.
The number of deals have seen a sharp drop of 47.45 per cent from January to March of 2017 as compared to the corresponding period last year. The drop in number of deals, which stands at 36 per cent in terms of value, is the lowest since 2014, the News Corp VCCEdge's start-up deal rReport, has found.
According to the report, the deal value of start-ups hit the lowest in 14 quarters, dropping below $300 million for the first time in nine quarters. The number of deals recorded during the January-March quarter of 2017 stood at 165, registering a sharp drop in comparison to the 314 deals recorded during the same period last year.
In terms of value, funding dropped to $237 million from $369 million witnessed in the first quarter in 2016.
"Rise in Series-B funding, even as seed and Series-A funding trends show a decline, reflects investor cautiousness in early and mid-stage funding and the increasing focus on market-readiness for funding," Nita Kapoor, head of India New Ventures, News Corp and chief executive officer, News Corp VCCircle said.
On the flip side, mergers and acquisitions (M&A) deals have picked up momentum post-2015 coinciding with the drop in funding activity in the start-up space, turning into an exit route for some promoters and a major source of funding for others, Business Standard quoted Kapoor as saying.
"Enterprises which can work on a combination of strong revenue models and continuously updated technological know-how which ensures a great consumer experience will continue to attract investors," Kapoor added.
According to the report, the drop was seen more in angel and seed funding. During the first quarter of 2017 total angel and seed deals reported was 120 as against 245, a drop of 51 per cent.
Series-A fund flow dropped to 24 from 44, while series-B funding dropped to 21 from 25.
With 40 deals mopping up around $96 million, 40 per cent of the total start-up deals of this quarter were in Bengaluru.