VC investments down to a trickle

Second quarter of 2016 saw just two deals against 11 in the same period the previous year

Venture capital investments in Chennai dwindled during the quarter ended June 2016 and stood at two deals with an investment of $15 million. During the same quarter in 2015, the numbers stood at 11 deals with an investment of $100 million. “After the third quarter of 2015, the number of VC investments were in single digits,” said Arun Natarajan, Founder of Venture Intelligence, a research firm focussed on private company financials, transactions and their valuations.

Analysis done by Venture Intelligence also shows that the number of Private Equity deals have fallen to 2 from 11 in the June quarter of 2015. Bangalore continued to be the top destination for PE deals grabbing 33 when compared to 29 during Q2 of 2015.

Two startup firms in Chennai with whom

The Hindu spoke to said that the ‘Big Boys’ are becoming cautious and are not writing heavy pay checks. “Investors are no longer looking at growth alone. They are watching each and every metrics with an eagle’s eye,” said one of them who wished anonymity.

R. Narayanan, President, The Indus Entrepreneurs (TiE), Chennai, said, “With the slowdown of e-commerce valuations, the investing community is wary as the valuations in the startup world get redefined. This will settle down shortly, hopefully, as fresh norms come of age. To that extent, Tamil Nadu is no exception,” he said. According to Mr. Narayanan, “Investors need certainty. Definite outcome of U.S. Presidential elections later this year, certainty on passing of GST is expected to influence the mood of the investors largely.” He summed up saying that this is just a passing phase.

Ditto was the trend across India for the quarter that just concluded. Statistics indicate that both Private Equity and Venture Capital investments have dwindled by 16 per cent each during the June quarter. Private Equity (PE) firms invested $3,602 million across 129 deals during the April to June quarter, when compared to $4,278 million across 169 deals in 2015.

Venture Capital (VC) firms made 94 investments worth $324 million during the three months ending June 2016 against 112 investments worth $491 million during the same quarter last year.

On a quarter-on-quarter basis, there is a 7 per cent dip in PE.

The first quarter of this year saw investments of $3,809 million across 169 transactions. VC activity level was also 9 per cent lower compared to the immediate previous quarter (which witnessed 103 deals worth $299 million).