MUMBAI
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When office commute platform MoveInSync decided to raise $15 million in January, it received term sheets from prospective investors within a week of launching the deal. Though such rapid response is still rare, many investors said deal activity has begun to pick up pace, signalling the approaching end to an agonizing funding winter.
While funding in the very early stages continued in the past two years, growth-stage funding had slowed to a crawl. Now, Series A and B rounds and beyond are warming up. More than half a dozen founders and investors said the deals cycle has restarted and companies are seeing renewed interest from investors.
“After a rough patch during covid, business has rebounded and is profitable. With the business growing, profitability too is growing. This has led to unprecedented investor interest in our company, I believe,” said Deepesh Agarwal, co-founder of MoveInSync that saw backing from Bessemer Venture Partners in its Series C funding round. “Even though we have closed the round, the inbound enquiries continue to come in,” he added.
As per Tracxn data, the top five deals since January include Credit Saison’s $144 million Series D funding from Mizuho Financial; Shadowfax’s $100 million Series E funding from investors led by TPG NewQuest; Capillary’s $95 million Series D funding from investors led by Unigestion and Filter Capital; Vivifi India Finance’s Series B funding of $75 million; and EV company River’s $40-million raise from investors led by Yamaha Group.
Like most other markets, India has seen deal activity in three buckets – venture capital, growth and buyout. With technology investments taking a beating worldwide and liquidity drying up, the early stage or venture capital deal flow was the most hit.
However, deals worth $443 million were struck in January, which nearly doubled to $835 million in February, Tracxn data showed. Though the numbers compare to $1.4 billion in January 2023 and $552.8 million in February 2023, bankers and investors expect things to get even better from hereon.
“We are going to have by far one of our best quarters with seven deals closing this quarter,” said Kashyap Chanchani, co-founder and managing partner of The Rainmaker Group, a boutique investment bank. “The investors are certainly more open to deploying capital and activity will pick up going forward,” he added.
In a recent interview with Mint, Sugandhi Matta, partner with ABC Impact, a Temasek-backed fund said it is looking to invest more in India. “Though India is an accessible market, it is also very expensive. Valuation continues to be a challenge in the Indian market. Our investment in the country is a matter of timing and correct pricing,” she said, adding that the fund is looking to write cheques between $10 million and $45 million in Indian companies and the activity is likely to pick up pace in 2024.
Neeraj Shrimali, managing director and co-head, digital and technology vertical for Avendus Group’s investment banking business, expects more than 18-20 companies to hit the public markets over the next 18-24 months, paving the way for more late-stage and secondary deals. “There are various pools of capital available for Indian start-ups, now more than ever. These include sovereigns, private equity and even crossover investors who are now keen on good Indian assets. We will see secondaries worth more than $7-8 billion executed in the same period,” he said.
“We are seeing an uptick in the number of companies that are showcasing stronger unit economics and profitability and investors are coming to the table to engage with these founders. In addition, there is sort of a valuation equilibrium setting in between the buyers and sellers, relative to a year back or as was in 2021, leading to more deal closures,” Shrimali said.
While growth-hungry companies are looking to raise capital, investors too are anxious about deploying the dry powder they are sitting on. Close to a dozen India-focused funds such as Stellaris Capital, A91 Partner, Peak XV, Accel Capital, Matrix Partners, Lightspeed Venture Partners and Peer Capital have raised funds locally to invest in Indian startups.
Such investors are beginning to reach out to companies. According to various estimates, there is more than $10 billion of dry powder waiting to be invested in the country across stages. “We are seeing a lot of tech-based deal flow coming our way, companies that have gone through cost rationalization and have either hit profitability or has a clear path to profitability. With the valuations having corrected from the ZIRP (zero interest rate policy) era of 2021-22, we are engaging more with companies to invest now,” said Gopal Jain, managing partner, Gaja Capital.