With some stability being witnessed in the Indian business environment, activity in the venture capital (VC) investment space is seeing a revival.
After a dismal first half of the calendar year, the number of deals by VCs has increased significantly in July.
“We are seeing the number of deals doubling from what was witnessed six months ago. I’d say we have reached almost 80% of the 2007 levels in terms of deal flow, so investments should follow,” said Rahul Chandra, director, Helion Venture P Ltd (HVPL).
The first half of the year was particularly bad for VC deals owing to the uncertainty in the business environment.
According to a study by Venture Intelligence with the Global-India Venture Capital Association, VC firms invested just $117 million in 27 deals during the six months ending June 2009. The corresponding figures for H1 2008 were $413 million and 67 deals.
“Now, with some clarity emerging on what the future holds for various businesses, we can expect some action in entrepreneurial activity, leading to an increase in venture investments,” added Chandra.
Taking a cautious approach to investments owing to the global economic slowdown, VC firms had become risk averse in the last few months.
Entrepreneurs were also reluctant to approach a VC thinking the latter wouldn’t entertain them given the market conditions.
Besides, VCs that had built up a significant portfolio over the years have been restructuring their portfolio over the last 9-10 months.
“Over 70% of the time was being spent on restructuring portfolio companies, reorganising cash flow situation etc. As a result not many deals happened for a better part of this calendar year. Now the situation looks fairly stable and activity has started to pick up,” said Mohanjit Jolly, executive director, Draper Fisher Jurvetson (DFJ).
The investment firm is looking at a dozen-odd very interesting companies in the healthcare & healthcare services, logistics & distribution, education, telecom and consumer media sectors. “I’m optimistic of concluding a couple of deals in the next 6-odd months,” Jolly said.
Some venture capital firms feel the number of investments in venture (early stage) never fell that much. “Many funds have not announced deals, so public data may not be entirely accurate,” said Suvir Sujan, MD, Nexus India Capital Advisors.
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