Investment trends for 2013 have revealed a shift in venture funding. While some trends are intriguing, others are worrying results, depending on the sector you’re in.
Taking a big bite out of the venture capital pie was restaurant chain Barbeque Nation, which cracked a $20-million deal. However, sectors that led the pack were information technology and allied companies as well as healthcare companies, especially niche hospital chains. More than three quarters of the investments made in 2013 were in these two sectors, according to Venture Intelligence, a division of TSJ Media, a data and analytics provider that focuses on private firms.
Falling behind were earlier favourites -- education, financial services and energy sector ventures -- which failed to clock many deals in 2013.
IT & ITES accounted for 63 per cent of the deal volume, of which online services companies were a hot favourite, where VCs invested $237 million spread over 68 investments. Mobile VAS companies saw investments worth $46 million over 22 deals.
Noteworthy deals in the IT sector were Ola Cabs ($20 million by Matrix Partners India and Tiger Global), Cardekho ($15 million by Sequoia Capital), Healthkart ($14 million by Intel Capital along with existing investors Omidyar Network and Sequoia Capital) and ScaleArc ($12.3 million from Accel India and existing investor Nexus Ventures).
In the healthcare sector, many maternity and childcare hospital chains succeeded in getting funded. Topping the list were Cloud Nine ($16.3 million from Sequoia Capital India and existing investor Matrix Partners India), Rhea Healthcare ($13.5 million from Peepul Capital) and Surya Child Care ($9 million from OrbiMed) and home-based medical facility provider Portea Medical ($8 million from Ventureast and Accel India).
The biggest deal, however, was cracked in the food business. The investment of $20 million, made by CX Partners in the restaurant chain Barbeque Nation, was the largest in 2013. Other investments in the food and beverages industry went to The Beer Café, Capricorn Food Products, Ovenfresh and Dana Choga.
The data spelt bad news for early-stage ventures. Initial round of investments in companies less than five years old and that require investments less than $20 million are not what VCs are looking for any more. Early-stage deals, which accounted for 83 per cent of the total investments in 2012, shrank to 68 per cent in 2013. Deal sizes too are getting smaller, which is evident from the fact that nearly 70 per cent of all investments made in 2013 were below the $5-million mark.
Also, overall investments in 2013 were lower in terms of both the number of deals and investment value, compared to 2012. Calendar year 2013 saw $805 million being invested through 206 deals, 18 per cent less than the $898 million invested through 252 deals in 2012.
Geographically, although Bangalore- and Mumbai-based ventures snagged the same number deals (49 each). In terms of the sum invested, Bangalore steered past with $214 million vis-à-vis $164 million invested in Mumbai-based start-ups. More than half the money invested in 2013 went to companies headquartered in South India.
You can send your feedback on firstname.lastname@example.org or simply post comments below