Seven growth stage funds that are going slow on Indian startups

Flipkart | Photo: Mint

Indian start-ups have been feeling the heat of a funding slowdown since late last year, leading several start-ups en masse to cut down on marketing spends and customer acquisition and instead focus on unit economics. A number of early-stage start-ups have shut shop for want of funds in the last six to eight months, some others are scrambling for the next round of funds, while the more mature ones are focusing on conserving cash to withstand the funding slowdown.

The sudden pullback by SoftBank Group and Tiger Global Management are evident and widely reported, but the exit of several hedge funds that were actively investing in 2014-15 have also contributed significantly to the funding crunch.

Hedge funds typically invest heavily in start-ups during boom times and flee at the first sign of trouble so their exits haven’t come as a surprise.

Here are a few growth stage funds that are going slow on Indian start-ups in 2016, after a bull run last year, based on data provided by VCCedge.

Tiger Global Management

Tiger Global Management, the biggest backer of Flipkart, invested in 35 Indian start-ups in 2015, across verticals such as online fashion retail, hyperlocal grocery delivery, inter-city logistics, electric scooters and healthcare technology, among others. The biggest beneficiary was, of course, Flipkart. However, Tiger turned off the tap this year, investing in only three Indian companies—Shopclues, The Viral Fever and Nestaway—in the first eight months this year. It is unlikely that Tiger will pick up pace in the next four months. According to an industry expert, a lot of Tiger’s portfolios will struggle to raise funds, especially because the main investor seems to have backed out.

SoftBank

The Japanese telecom major has championed Indian start-ups since 2014, backing Snapdeal, Ola and Housing. Between October and December 2014, SoftBank invested about $1 billion in these three companies and committed another $10 billion in India in the next 10 years. The company subsequently backed Snapdeal, Ola and Oyo, a budget hotel aggregator, in 2015. However, with Snapdeal slipping down to the third spot in the Indian online retail space behind Amazon and Housing undergoing a rough patch amid the exit of co-founder Rahul Yadav, SoftBank has barely made a move on India this year, barring a $15 million bridge round in Housing.

DST Global

DST Global, a venture capital firm backed by Russian billionaire Yuri Milner, has backed companies such as Flipkart, Ola and Practo over the last two years. The firm participated in all three of Flipkart’s fund-raises in 2014 and backed Ola twice last year, when the company raised $400 million in April and again in November, when Ola raised $500 million. DST Global was also a part of a consortium of investors that invested $90 million in Practo in August last year.

However, the firm, which had earlier invested in Facebook, Xiaomi and Didi Chuxing, among others, is yet to make a single investment in India this year. None of DST Global’s existing India portfolios raised fresh capital this year and it is to be seen if the firm chooses to back them further.

Falcon Edge Capital

Falcon Edge Capital, a New York-based hedge fund, had stuck six deals in 2015, investing about $90 million. Besides Ola, it had invested in mobile payment service provider Mswipe Technologies Pvt. Ltd last year. However, the firm, one of the many investors who have remained cautious on their bets in India, is yet to strike a single deal this year in India.

Sofina

The Brussels-headquartered investment company counts online marketplace Flipkart and beverage maker Hector Beverages, which owns Paperboat, in its portfolios. The company invested in three Indian companies last year, including online doctor discovery start-up Practo. However, the firm has plugged the funnel this year, backing only online education start-up Byju’s.

Steadview Capital

The Hong Kong-based investment firm invested in six companies in India in 2015: Flipkart, Saavn, Quikr, Urban Ladder, Ola and Policy Bazaar. Steadview became one of the key growth stage funds to bet big on Indian start-ups last year. However, like many of its peers, Steadview is yet to open its book in India this year. Interestingly, none of the companies it backed last year have raised follow-on funding rounds this year.

Goldman Sachs

The investment bank invested $114 million across four deals in 2014 in India. The number of deals increased to six in 2015, but the quantum of investment shrunk to $98 million, which included an investment in online furniture marketplace Pepperfry. However, despite projecting that the Indian e-commerce market will become a $100 billion entity in 2020, the firm has not taken a single bet in Indian start-ups in 2016. Its only investment in India this year was about $5 million in SP Apparel, which owns fashion brand Crocodile, which has left start-ups guessing the firm’s next big move in Indian start-ups.

Also read:

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This story was first published on Livemint

Singapore Reporter/s

In Singapore, we are looking to double our reporting team by this year-end to comprehensively cover the fast-moving world of funded startups and VC, PE & M&A deals. We want reporters who can tell our readers what is really happening in these sectors and why it matters to markets, companies and consumers. The ability to write precisely and urgently is crucial for these roles. Ideal candidates must have to ability to work in a collaborative, dynamic, and fast-changing environment. We want our new hires to be digitally savvy and ready to experiment with new forms of storytelling. Most importantly, we are looking for hard-hitting reporters who work well in a team. Collaboration and collegiality are a must.

Following vacancies can be applied for (only in Singapore).

Following vacancies can be applied for (only in Singapore).   

  • A reporter to track companies/startups that have raised private capital, and have the potential to become unicorns. SEA currently has over 40 companies with a valuation of over $100 million and under $1 billion.
  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
  • A journalist to track special situations funds, distressed debt and private credit (from the PE angle) across Asia.

Singapore Reporter/s

In Singapore, we are looking to double our reporting team by this year-end to comprehensively cover the fast-moving world of funded startups and VC, PE & M&A deals. We want reporters who can tell our readers what is really happening in these sectors and why it matters to markets, companies and consumers. The ability to write precisely and urgently is crucial for these roles. Ideal candidates must have to ability to work in a collaborative, dynamic, and fast-changing environment. We want our new hires to be digitally savvy and ready to experiment with new forms of storytelling. Most importantly, we are looking for hard-hitting reporters who work well in a team. Collaboration and collegiality are a must.

Following vacancies can be applied for (only in Singapore).

Following vacancies can be applied for (only in Singapore).   

  • A reporter to track companies/startups that have raised private capital, and have the potential to become unicorns. SEA currently has over 40 companies with a valuation of over $100 million and under $1 billion.
  • A reporter who can get behind the scenes and reveal how funding rounds are put together, or why they’ve failed to materialise. She/he in this role will largely focus on long-format stories. 
  • A journalist to track special situations funds, distressed debt and private credit (from the PE angle) across Asia.