VC investments in India more than doubles from previous quarterly high during Q3 2021: Report

Venture Capital (VC) investment in India more than doubled from its previous quarterly high of $6.7 billion in Q2 2021 to $14.4 billion during Q3 2021, according to a recent report by KPMG.

According to the report Venture Pulse, a quarterly report published by KPMG Private Enterprise on VC trends globally and in key jurisdictions around the world, India accounted for four of the largest deals in the Asia-Pacific region this quarter.

Global VC investment also maintained momentum in Q2 2021, setting a record for the third time in a row with $171.7 billion across 8,682 deals.

"An incredible amount of dry powder, increasing participation by less traditional VC investors, and robust exit opportunities helped keep the VC market very healthy," the report said.

A record 11 deals at or over $1 billion during the quarter helped propel VC investment to the new high. Global exit activity also remained robust with $292 billion in exit value across 780 deals in Q3 2021.

India set an all-time high for VC invested. India saw a record 498 VC deals during the quarter, up from 376 the previous quarter.

"Investors outside traditional VC firms took part in a number of deals in Q3’21 – including traditional PE firms, which have not historically been active in consumer tech deals in India," the report said.

IPO (Initial Public Offering) activity was also very strong in the country during the quarter with indications Q4 2021 being even stronger.

Edtech was an active sector during the quarter. Fintech also continued to attract significant investment and attention from investors in India, as per the report.

"While payments continued to attract the most fintech investments in India, VC investors have also shown strong interest in the insurtech space given the low penetration of insurance in the country compared to other jurisdictions around the world," it added.

Nitish Poddar, Partner and National Leader, Private Equity, KPMG in India said, “The money pouring into consumer tech companies, D2C companies, fintech companies and others here in India only going to get stronger."

“We already have had more unicorns this year than in the last seven or eight years put together. Looking forward, there are a few big IPOs coming down the pipe and, assuming they go well, that is only going to strengthen investor confidence here even further," Poddar added.

Amarjeet Singh, Partner, KPMG in India said, “We are seeing a lot of strategic investments in India – not only from global corporates looking to get into the market, but also from some of the larger Indian conglomerates."

"Over the last few quarters, we’ve seen big companies focusing on investing in and acquiring other companies and startups in different areas. They are slowly trying to move into the area of something called the super app: an app that fits all the purposes that a consumer might need," said Singh.

Globally, VC investment in the Americas reached a third-straight record high, with $94 billion invested across 3,934 deals. VC investment in Europe also remained strong, with $27.5 billion of investment across 1,910 deals in Q3 2021. However, this was lower than the record $36 billion seen in Q2 2021.

The Asia-Pacific region saw $48.1 billion in VC investment across 2,616 deals in Q3 2021. This was the second highest quarter of VC investment after Q2 2018.

Global corporate-affiliated VC investment reached a record $85.5 billion during the quarter, propelling annual CVC-related investment to a record $230.7 billion with a quarter left in the year, the report added.

VC-backed exit value declined from a record $399.2 billion in Q2 2021 to $292.4 billion during Q3 2021. Total annual exit value passed the $1 trillion for the first time ever with Q4 2021 still to come.

Globally, Cleantech has garnered popularity among investors with VC investment in ESG and cleantech increasing significantly in Q3 2021

Investor interest in ESG and cleantech is expected to keep growing, as per the report.

"VC investment in Q4 2021 is expected to remain very healthy, bringing an end to an incredible year for VC markets around the world. The continued abundance of capital, robust fundraising activity, rapidly maturing VC markets around the world, and a growing diversity of sectors attracting investment will likely keep total investment very strong," the report said.

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