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The Government should open up and support early and seed stage start-ups that are facing challenges in raising funds, said investors.
According to a recent Nasscom report, while late stage funding has increased by 250 per cent in 2018, there has been steady drop in funding for seed stage start-ups.
“With SoftBank and Tiger Global investing, it is making companies looking for Series C onwards kind of funds more attractive. Larger companies that need to raise $100 million-plus are more attractive because they are winners now,” said Sunil Goyal, Managing Partner, YourNest Ventures.
Of the $4.3 billion funding raised till September 2018, over 50 per cent went to large companies such as OYO and Paytm Mall, the Nasscom report said.
However, there is not enough traction in the early or seed stages, which essentially need more funding. Goyal said, “Close to 1,000 start-ups are funded every year in a pre-series A and by angel investments. Those 1,000 are the ones that are creating the start-up eco system, innovation and entrepreneurship. Those are the ones attracting funding of close to $1 billion, which is going to the venture capitalist space every year.”
However, that is not translating into bigger rounds of Series A and B funding. “This is where every VC fund is waiting for better traction,” he added.
Though overall there is more maturity in the funding segment, early stage funding issue needs to be solved. “There was a time when growth stage people were dying. We need more successful companies in India and getting more funds in growth stage is not a bad thing,” said Sangeeta Gupta, Senior Vice-President and Chief Strategy Officer, Nasscom.
“But, I think, there should be other alternatives such as support from State governments and different models, as in Israel,” she said.
Goyal added, “It is about how much opportunity Indian government will make where the spending power is.” If a technology is of national interest, they will not be bothered about the price point. But more often than not they look at international solutions without any value addition, he said.
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