VC funding hits 12-month high for start-ups in penultimate stage in April

Annapurani. V Chennai | Updated on May 25, 2021

Other stages witness dip in investments

The amount of venture capital funding that went into penultimate or the growth-private equity (PE) stage firms surged in April, even as start-ups in other stages saw a dip in investments during the month.

According to data from Venture Intelligence, investments in growth-PE stage start-ups climbed to $2664.6 million in April, the highest in the last 12 months.

Growth-PE funding includes Seed to Series D investments that are greater than $20 million or Series E to Series F of institutional investments into companies that are less than 10 years old.

Venture Intelligence data showed that, across all stages except for growth-PE, the amount of funding garnered in April was less than that of March. For instance, early-stage firms cumulatively attracted $79 million in April as against $136 million in March, growth-stage firms garnered a total of $7 million in April as against $61 million in March, and late-stage firms collectively attracted $1168 million in April as against $1527 million in March.

On the other hand, the funding that went into the growth-PE stage in April is the highest amount firms in this stage have received in the last 12 months. The number of investments made in this stage also rose to 22 deals in April, another 12-month high.

“The advent of the second wave of coronavirus in India was expected to put some brakes on PE-VC deals. This is reflected in the numbers across a majority of the deal stages. At the same time, Growth PE has seen a flurry of activity in the maturing Indian start-up ecosystem in the last few months led by players like Tiger Global,” said Sandeep Mishra, Vice-President, Research and Investments, at Zephyr Peacock India, adding, “April specifically had the advantage of many large-sized deals into companies like ShareChat, PharmEasy, Meesho, Cred, Chargebee, Ofbusiness, Razorpay, Urban Company, Groww and more. That was reflected in the surge in deal size for such companies.”



Performance, returns

Anil Joshi, Managing Partner, Unicorn India Ventures, said the growth PE stage has shown good traction mainly because of their performance and promise of better returns to investors in short- and mid-term.

“The ability of investors to scout deals, meet companies and founders, talk to stakeholders in the market, and conduct due diligences get stunted in these times. Further, investor priority shifts to existing portfolio companies in helping them survive and grow. Hence, new deals take a back seat. But the dip has not been as dramatic as last year, which also points to how the community is transforming with learnings from the past year,” Mishra noted.

However, with the second wave of Covid infections surging in May, investors expect a dip in funding activity in the coming few weeks.

Dealing with pandemic

“A lot of organisations today are focussed on dealing with the pandemic the best way possible, so funding conversations may be delayed temporarily,” said Jatin Desai, Managing Partner, Inflexor Ventures, adding: “These discussions take a while to close. While the groundwork may be happening in the background, we may see a lull in the few weeks to come. But we expect the deal activity to bounce back once this second wave is contained and vaccination efforts accelerate.”

Other funding stages are — early-stage funding which includes Seed to Series B of institutional investments into companies that are less than five years old, not part of a larger business group, and the investment amount is less than $20 million.

Growth-stage investments constitute Series C to Series D funding of institutional investments or first/second round of institutional investments for companies that are greater than five years old and less than 10 years old or spin-outs from larger businesses, and the investment amount is less than $20 million.

Late-stage funding includes investment into companies that are over 10 years old, or Series G or later rounds of institutional investments.

Published on May 25, 2021

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