Brimming with young energy, India presently is a fertile ground of opportunities for the businesses of all sizes. Whether it’s a start-up or a firm looking at growth and diversification, the Indian market is highly receptive to “ideas” right now. Market trends project eCommerce, logistics, IT, and the hospitality sectors as the game changers. As they become stronger, the demand for resources – human, capital, and liquid – is also increasing. The share of these sectors in increasing in the GDP and are currently offering improved employment opportunities. Deservingly enough, a convincing present and the promising 5-year economic outlooks are pulling in huge venture capital (VC) funding from within the India and outside. In 2014, the country with $4.6 billion in its booty is the third highest venture capital funding destination after the US ($58.9bn) and China ($8.9bn). (Source: The Times of India) Bangalore topped the national chart claiming over 50% ($2.6bn) of the total funding.
Besides facilitating the business scale, the cash inflow has also instilled confidence in the entrepreneurs to try out the untested & innovative concepts. This has also fuelled the quick and profitable business decision-making. As a result, new ideas are floating – startups, takeovers, buyouts, mergers & acquisitions, expansion, diversification – the business structures have inbuilt flexibility to adapt with the change. Accordingly, diverse funding & financing patterns are enforced when sealing the deals. While the Venture Capital funding is limited in terms of investment, returns, and management control, the Private Equity (PE) players get to steer the businesses to quite a degree. With a much higher investment bandwidth, they have a wider ownership stake and therefore, a pivotal role in the company’s strategic decision-making. Although, VCs sometimes find a profitable exit in India a challenge, the PE firms look at a patient 5 to 10-year projection and are often able to reap good yield. Another funding type, the angel investors can get involved, even at the seed money stage and aim mostly for multiplied returns quickly, usually within a 5-year term. Overall, just like any business deal, the VCs (in any format) too prefer to scout for newer ideas with a potential for returns.
Set up in 1993, the Indian Private Equity & Venture Capital Association (IVCA) aims to organize a venture capital and private equity industry in India to encourage entrepreneurship and business innovation. Since 2006, the association has witnessed growth, which accelerated in 2009. Needless to add, the tech and ecommerce funding sweeps the ‘propagating’ list. With Flipkart standing tall at a total of approx. $1200 million in August 2014, Snapdeal is second with around $233 million, surely a massive lag from its competitor. Quikr follows next with $90 million. Myntra, ANI Technologies, Hungama Digital Media, Freshdesk, iYogi, Jabong, BigTree, all fall in the $25-$50 funding band, in that order.