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Most VC Firms In India Closed Around 10 Investments In 2012; 42% Seed Investments: GSF Survey

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Around 40% of the venture capitalists (VCs) and around 50% the angel investors in India made less than five investments in Indian startups during the year 2012, according to a survey compiled by Global SuperAngels Forum (GSF).

Methodology: The company says it had surveyed 40 venture capitalists and angel investors through an online questionnaire for this initiative and the report was compiled based the responses received and GSF’s inputs based on its work with startups and its network of advisors and partners.

Here are some highlights from the survey:

– Most venture capitalists closed less than 10 investments while most angels closed less than five investments. Several formerly active angel investors didn’t invest at all in 2012.

VC Angel Investments

– In the deals that were closed, the participation of venture capitalists in seed rounds has significantly increased as compared to venture round investments. The report states that VCs participated more in seed level investments rather than Series A investments, indicating that VCs are taking lesser risks and picking their bets. Citing several unnamed VCs and angel investors, the report stated that there will be a slowdown in Series A investments in 2013 and exits will be even harder to come by during this period.

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VC Investments & Angel Investments Breakup: Seed round investments accounted for 42% of the venture capital investments in 2012, followed by Series A investments which accounted for 36% of the investments in 2012. Series B accounted for 12% of the investments while higher investment rounds accounted for 11% of the investments.

However, if you consider angel investments, seed round investments accounted for 79% of the total angel investments in 2012, followed by Series A investments which accounted for 15% of angel investments in 2012 and other investments which accounted for 6% of the angel investments in 2012.

The report states that both angels and VCs are now investing across various investment stages and collaborating on investment deals. Around 61% of the angels said that there was greater collaboration with VC firms in 2012, as compared to 2011 and this collaboration will continue to increase in the forthcoming years.

Lack of Exits: Both VCs and angel investors feel that the lack of exit opportunities in India continues to be one of the biggest areas of concern and believe this trend will continue in 2013. The report states that around 60% of the VC exits in 2012 were due to strategic divestments while only around 10% of the VC exits were due to IPO. Remember that the potential for exits drives investment from venture capitalists, and a higher inclination for exits would mean that VC’s are more likely to make investments, and entrepreneurs are more likely to start up.

VC Exits

Investors Looking At Non E-commerce sectors: The report mentions that investors have become cautious of e-commerce investments in the country, due to the ongoing turbulence in the segment and investors are now looking at non e-commerce companies to make investments in 2013. This ties in with what we had previously told about VCs being selective about which e-commerce companies to back, since some sites were raising investments while others with common investors were either being shut down or merged.

Corringendum: The previous headline inadvertently mentioned Indian VC firms instead of VC Firms in India.  It has now been corrected.

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Related:

#GSF2012: Where Will The Exits Come From?
Sanjeev Bikhchandani: Not Enough Indian Capital To Support E-Commerce In India
The Funding Environment For E-Commerce In India – K Vaitheeswaran, IndiaPlaza
A Rant On India And E-Commerce

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