VC funding flows back in Q2, bets big on digital

Early stage venture investments have picked up significantly since July, after a relatively slow period of deal-making in the previous quarter, multiple investors told.

The pandemic is throwing up opportunities for new digital businesses, prompting more entrepreneurs to enter the fray. Deal flow and the number of startup ideas a venture firm evaluates

registered a 50 per cent-plus uptick from the previous quarter, according to at least six funds ET spoke to, with some also attesting to an improvement in the quality of founders.

“There has been a gradual realisation in July-August that this post Covid-19 world is going to be the new normal for some time,” said Karan Mohla, executive director at Chiratae Ventures India Advisors, which is evaluating more than 250 deals every month – a level comparable to its deal flow in January.

Other funds such as Inventus Capital Partners, Lightspeed Venture Partners, Matrix Partners, WaterBridge Ventures and Orios Venture Partners said deal activity had picked up relative to April-June.

The massive fund-raising of Reliance Jio Platforms has also piqued the interest of many new investors, said venture capitalists. These new investors are eager to grab a share of India’s digital and technology sector, said venture capitalists, who have been galvanised into action by the realisation that the calendar year is ending.

In contrast, in the first half of 2019 – one of the busiest years for early stage VC funds and startup investments – number of early stage deals was 476, compared to 240 in 2020, Tracxn data showed.