Early stage funding continues to be vibrant for startups
About 250 cos raise Series A investments in 2021, witness 75% growth from a year-ago period
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Mumbai: The Early Stage funding environment in India - specifically Seed and Series-A investments - continues to be vibrant. According to Venture Intelligence data, 250 companies raised Series-A investments during 2021, with an increase of 75 per cent from the year-ago period. Even in the ongoing quarter – as late stage funding has started to slow down significantly– the pace of early stage investments have held up.
The first edition of a new report series from Venture Intelligence – The Series-A Landscape Report – provides scope for optimism. The number of companies raising Series-A rounds grew at a brisk CAGR of 19 per cent in the four-year period from 2017 to 2021. The e-commerce was the most preferred sector for Series-A investments during 2015-2021 period, followed by SaaS, fintech, healthcare (including healthtech) and food & beverages (including D2C brands).
The most active Series-A investors during 2021 included Sequoia Capital India (with 79 such investments), Accel India (46 investments), Matrix Partners India (28), Beenext (28), Blume Ventures (27) and Elevation Capital (26). Sequoia Capital India and Accel India had invested in 63 per cent of their Series-A investee companies as part of their seed rounds (excluding companies that raised a direct Series-A round).
IAN Fund (88 per cent), India Quotient (86 per cent) and Blume Ventures (80 per cent) had the highest ratio of follow on participation in Series A rounds (for startups which they had Seed funded). Talking to Bizz Buzz, Arun Natarajan, Founder, Venture Intelligence, says: "Things have changed for the ecosystem for past several years. Domestic network of investor comprising start-up founders and the early employee of start-ups with ESOP have turned investors in the today's start-ups with real cash in hand and hence seed capital is very vibrant."
The size of deals might have come down, but not the number of deals, he added. The 2015-2021 period witnessed an average of 540 seed deals each year, shooting up sharply to 756 deals in 2021. SaaS was the most preferred sector for seed investments (during 2015-2021) followed by e-commerce, fintech, healthcare (including healthtech) and edtech. The top Seed investors during 2018-2021 included Sequoia Capital India (88 start-ups), Axilor Ventures (49 start-ups), Accel India (48), 3one4 Capital (41), Blume Ventures (39) and India Quotient (36).
Startups from Bangalore were the most favoured by investors–both in the Seed and Series-A segments - during the 2015-2021 period, followed by startups from National Capital Region and Mumbai. A key highlight of the Report is the 'Venture Capital Funnel' that shows the fraction of companies that have 'graduated' from receiving Seed investments to Series A investments and from there to Series-B investments and beyond.
Of the 2,848 companies that raised Seed investments during the 2015-2021 period, only 18.1 per cent (516 companies) progressed to the Series-A Round. And, from those 516 companies (that raised Seed and Series-A rounds during 2015-2021), 174 companies (33.7 per cent) went on to raise the Series-B round. Of the 174 companies, 76 companies (43.7 per cent) went on to raise the Series C round. Almost a third of the companies that raised a Series C round (32.9 per cent or 25 companies) managed to raise subsequent rounds during the period of study.
"Series-A is the crucial link between a vibrant seed stage and a mature late stage VC ecosystem. But there is very little data on this. This report by VI is a timely spotlight on an important metric that founders and investors should pay more attention to," said Ganapathy Venugopal, CEO of Axilor Ventures.
The report also highlights 'Pipeline Creators'–investors that make seed investments that are relatively more successful in raising Series-A investments. Sequoia Capital India was the most active Series-A pipeline creator in the 2018-2021 period, with its Seed investments in 35 companies that went on to raise a Series A round. Sequoia was followed by Blume Ventures which had backed 20 such companies and India Quotient that seed funded 19 such companies.
