InnoVen Capital, Asia’s leading venture debt firm, released the 5th edition of the ‘Early-Stage Investment Insights Report FY 2020-21’, outlining current trends in the early-stage (Seed/Pre-A) Indian start-up ecosystem. The report focuses on investment activity across Seed & pre-series A stage, by analyzing market information, along with a survey conducted with 16 leading institutional early-stage investors.
The funding momentum from 2019 continued into 2020 with $279M of investments being made, despite few months of slowdown caused by the pandemic. B2B, Consumer & EdTech were the most favored sectors for surveyed investors. The majority of investors (74%) expect the funding activity this year to remain at the same level or go even higher. The top sectors investors are interested in this year to include Enterprise SaaS, HealthTech, FinTech, and EdTech.
Over 80% of respondents invested more this year compared to last year, with the majority of investments in the $500K-$2 MM range. Valuations of seed/Pre-A rounds continue to go up, with 50% of deals being done at over $5 MM valuation. Almost 75% of surveyed investors believe that the valuations were on the higher side driven by intense competition for high-quality deals and the entry of large established VCs in this space.
Investors mentioned that the quality of the founding team was by far the most important factor they focus on while evaluating deals. Almost 50% of their portfolio companies from the last two years were able to raise a follow-on round. The key reason for companies failing to raise a follow on the round was because they were addressing a niche market opportunity.
The survey also highlighted that there was a preference for companies with more than one founder, with 89% of funded start-ups having two co-founders. Bangalore, NCR, and Mumbai continue to form the core of the start-up eco-system. Over two-thirds of companies invested were based in Bangalore or NCR.
Commenting on the findings, Tarana Lalwani, Senior Director, InnoVen Capital India said, “By continuing to partner with some of the most prominent early-stage institutional investors in the country, we continue to deepen our understanding of the early-stage ecosystem. We are pleased to release the fifth edition of this report. Early-stage investment activity has proven to be resilient despite the pandemic, with bigger transaction sizes and higher valuations, a clear sign of a maturing early-stage ecosystem. At InnoVen we continue to be optimistic, and look forward to engaging with founders and investors”.
About the Report:
The ‘Early-Stage Investment Insights Report FY21’ provides analysis and trends on pre-series A/Seed investment activity. The report has been prepared by InnoVen Capital India Private Limited (“InnoVen Capital”) with inputs from reputed early-stage institutional investors. The following investors participated in this edition of the report – 3one4 Capital, Artha Ventures, Blume Ventures, First Cheque Ventures, Indian Angel Network, India Quotient, Inflection Point Ventures, Kae Capital, Mumbai Angels, Omnivore, Orios Venture Partners, Stanford Angels, Sauce.vc, Titan Capital, Waterbridge Ventures and YourNest Capital