The Hindu Business Line : Angel investors betting big on Indian start-ups

New Delhi, April 25 Amid a slowdown in global venture capital investments, Indian start-up firms are emerging as clear favourites for seed capital among global angel investors.

During the first quarter of 2008, US-based venture capitalists invested $350 million in 38 deals in India, a 42 per cent jump from the previous quarter, when $246 million was invested in 33 companies. In the case of China, the funding by US-based VC firms dipped 24 per cent to $250 million invested in 32 firms during the first quarter of 2008, down from the $331 million invested in 39 deals in the previous quarter, according to data from the MoneyTree report from PricewaterhouseCoopers and the US-based National Venture Capital Association.

During the whole of 2007, Venture Capital firms had cumulatively invested $543 million over 98 deals in India, according to Venture Intelligence data.

With VC funding by global angel investors heading towards a slowdown, the increasing preference for Indian entrepreneurial talent by US angel funds is being seen as a positive trend. “US venture capital funds generally set the trend for funds based out of other major geographies, including Europe, and the preference for India could be replicated by angel investors from other regions. After a euphoric rush into China in the beginning, investments into that country have been petering out because a lot of initial investors misjudged their local partners or the quality of talent in the rush to get in,” an industry player said.

Besides, another trend increasingly visible is that VC firms are going beyond early-stage deals across both India and China, with more funds going into growth funds, which typically invest in middle-to-late-stage firm that already have a bankable product or service and may even be profitable. Going forward, more venture capital money could go into late-stage companies if the market for initial public offerings remains weak, a market player said.

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