First Half VC Deal Run Robust, Non-tech Gains Share

Good news for Indian startups and early stage companies. Venture capital investments during the first six months of calendar year 2008 touched $340 million across 51 companies. This compares very favourably with investments during all of 2007 which saw investments at $540 million across 98 companies. It may be too optimistic to hope that venture capital investments will touch $1 billion by the end of the year, but no harm done in aiming high.

Significantly, during the first six months this year, non-technology companies accounted for 40% of deals. Technology companies continue to dominate with a 60 per cent share but this has been gradually reducing over the years. Venture Intelligence’s Arun Natarajan notes, “Venture capital investments are increasingly focusing on alternative energy, media, retail and other consumer demand-led sectors.” Venture Intelligence is a Chennai-based research firm focused on the private equity and venture capital space and has just released its second quarter (April-June) findings deal activity in the Indian venture capital and private equity — VI Private Equity Release — space. The venture capital findings — VI Venture Capital Release — are in collaboration with the US-IVCA.

Following is a list of the top five deals in the venture/early-stage space:

• Obopay: $20 million from Essar Communications, Promethean India, Richmond Management, Others
• Sai Advantium: $20 million from MPM Capital
• Cleartrip: $18.5 million from Draper Fisher Jurvetson, Others
• Deeya Energy: $15 million from Draper Fisher Jurvetson, BlueRun, NEA, Others
• Soham Renewable Energy: $15 million from DE Shaw

For details on the top ten deals, see the press release (link above). The deal sizes for the top ten deals do indicate that there is an inclination for Series B or later stage deals. Still, it will be comforting to see that the appetite for young Indian companies among investors has not diminished, despite a slowing market in the US. Also interesting to note is the presence of investors such as DE Shaw and IDFC Private Equity on the list of venture deals. Of course, in India, which is predominantly a growth market, the lines between venture capital and private equity are often blurred.

Here’s looking forward to an even better second half.