Bengaluru: Venture capital (VC) firms have stepped up early-stage funding in startups on the back of faster digital adoption as well as digitization of existing offline businesses across edtech, fintech, consumer tech, social commerce, healthcare among other sectors.
Early-stage investments witnessed a sharp uptick in the August-October period with $323 million across 101 deals, compared to $180 million across 75 deals during May-July, according to data by Venture Intelligence.
Between January and October, $966 million was invested across 314 early-stage deals, lower than $1203 million during the same period in 2019, considered a bumper year for early-stage investments.
"…This is a positive time for early-stage startups as they are seeing traction from both customers as well as investors. As is the case with any cycle, large winners will be created from this increased investment activity. Rapid digitisation brought about by the pandemic and the following lockdown/remote work environment has given a strong growth momentum to many sectors as startups reach faster product-market fit," said Mayank Khanduja, managing director , Elevation Capital (formerly SAIF Partners).
Elevation Capital which recently closed a $400 million fund has doubled its investment count this year to 15 deals till August, 13 of which were early-stage startups.
Top early-stage investments in the August-October period are in startups in Flexiloans (NBFC), UniOrbit (lending-SME loans), InVideo (video editing tools), Avail Finance (consumer loans) and Behtar (e-commerce), according to Venture Intelligence.
Dev Khare, partner, Lightspeed India said the pandemic accelerated enterprise digital transformation efforts, SMBs have gone online in millions and there are signs of new consumer platforms like audio, creator economy etc.
This year, Lightspeed India has added several companies to its portfolio including Teachmint and Dukaan in under SMBs, Uni and Apna in the consumer category, Hubilo and Pepper Content in enterprise segment.
VCs believe the pandemic has also made early-stage startup founders more mature and prudent in operations and financial management, which have inadvertently led to improving the quality of entrepreneurs.
“Investors continue to be active and focus on less risky early-stage bets. The pandemic, along with digitization, has created a level-playing field, for early-stage startups which are challenging the matured ones now. More companies are meeting the bar as the ‘opportunity’ they’re chasing becomes more real, and customer cognizance towards digital solutions increases," said Sanjay Swamy, managing partner at Prime Venture Partners (PVP). PVP announced three deals in September-October.
Chiratae Ventures is planning close to 12 investments this year, as the market expects newer pools of late-stage capital to enter clear from the new investments Jio has attracted in recent months.
“There is clearly enough ‘dry-powder’ in the market, which we see now being deployed across pre-Series A and later stage deals, as investors continue to tread with caution. Early-stage deals are much easier in terms of diligence than late-stage, especially when pandemic affects physical meetings," said Karan Mohla, partner, Chiratae Ventures.
Jatin Desai, managing partner, Inflexor Ventures expects a further pick up in technology startups deal flow.
“Given that our fund's theme is deep tech, tech IP / innovation, it should bode well for us. We are actively doing and sourcing early-stage deals. We have seen edtech, healthtech, consumer tech and fintech perform relatively better in recent months," Desai said.
Anup Jain, managing partner, Orios Venture Partners said marketplace models, social commerce, electric vehicle space and health are seeing an uptick, with edtech seeing maximum uptick.
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November 02, 2020 at 09:36PM
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Early-stage startup funding rises on the back of digitization - Mint
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