India-focused venture capital and private equity funds raise a record $14.1 billion

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TBS report

July 08, 2022, 1:45 p.m.

Last modification: July 08, 2022, 1:50 p.m.

An Indian rupee note is seen in this illustration photo from June 1, 2017. REUTERS/Thomas White/Illustration/File Photo

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An Indian rupee note is seen in this illustration photo from June 1, 2017. REUTERS/Thomas White/Illustration/File Photo

he year 2022 has seen a record number of India-focused venture capital (VC) and private equity (PE) funds raising new funds to invest in various tech startups in the country, surpassing all records in the last year. This is despite a collapse in the venture capital and private equity cycles and strong inflationary pressures.

India-focused venture capital funds raised $14.1 billion in capital to deploy into startups in the first half of 2022, according to a report by Silicon Valley Bank, Financial Express India reports.

That’s more than triple the growth from last year, when venture capital funds raised just $4.2 billion in capital for Indian startups.

The tech-based commercial lender also said in its report that around 76 new funds were launched in the country this year, compared to just 28 the previous year.

Some of the notable ones include Sequoia India’s $825m Growth Fund, Elevation Capital’s Fund VIII worth $670m, Accel India’s Sixth Fund worth $550m dollars and many more.

International companies have often invested in Indian companies from specific global, Asian or non-geographical funds. Today, we see companies building specialist teams – often on the ground – to invest in India’s innovation landscape, the report adds.

Lightspeed India Partners has been active since 2004, while Sequoia India, the most prolific investor, established its presence in India in 2006 with the acquisition of Westbridge Capital Partners.

In June 2022, Sequoia India closed $2 billion in funds to invest in Indian and Southeast Asian companies across the stages. Accel also established its Accel India Venture Fund in 2008 by acquiring Bengaluru-based Erasmic Ventures. Another Silicon Valley-based fund named Bessemer started investing in 2006 and raised its first India-specific fund in 2021.

Softbank, India’s largest foreign investor, has deployed around $14 billion over the past decade in India. In October 2021, Marc Andreessen and Ben Horowitz-ed a16z made their first investment in India, with suggestions of further India activities to come.

Apart from major international venture capital funds, major private equity and growth investors have also been bullish on India. General Atlantic, Insight Partners and Tiger Global made a combined 198 investments in India in 2021. Tiger Global was the most active investor by value in 2021, deploying $2.3 billion across 62 deals, according to the report. However, due to recent declines in public markets, international investors are reassessing their private market strategy, for example, Tiger is investing more in early-stage deals.

“For the rest of 2022, we expect muted private investment, falling corporate valuations, slower unicorn creation and delayed IPOs. We don’t expect 2022 surpasses last year’s record of $36 billion in venture capital investment, but we are confident that Indian venture capital investment is on track to surpass the years prior to 2021,” said Priya Rajan , Managing Director of Silicon Valley Bank for India, MENA and SEA.

Indian startups also captured $36 billion in global venture capital funding in 2021 through over 2,100 deals. In the first half of the current year (H1 2022), start-ups in the country have already secured $14 billion in funding across 870 deals. The Silicon Valley bank predicts Indian startups will raise a total of $31 billion from 1,958 deals.

“Valuations are modest compared to the US, but India’s leading SaaS companies have valuations and revenues in line with their US counterparts. Modest valuations provide opportunities for overseas investors in addition to the strong domestic investor community “, adds the report.

Venture capitalists see India as an alternative to China as in the past 16 months, China has enacted sweeping tech regulations, making headlines for shutting down Edtech companies, imposing fines on big tech companies after antitrust investigations and proposed sweeping data privacy regulations. Venture capital investment in China grew by 7% between the first and second halves of 2021 – a significant slowdown from a 110% growth between the first and second half of 2020. Meanwhile, capital investment -risk in India increased by 160% between the first and second half of 2020. 2021m the report pointed out.

Reforms, such as the Companies Act 2013, have increased transparency and accountability, boosting investor confidence in the Indian context. In May 2022, five years after the United States withdrew from the Trans-Pacific Partnership, the United States launched the Indo-Pacific Economic Framework, a trade agreement with India, Southeast Asian countries, the Australia, New Zealand, Japan and South Korea trust India, according to Silicon Valley Bank.

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