Early-stage funding more than doubles in 2019; tech startups raise close to $14.5 bn: Report

Startup investors continue to show preference to backing more experienced founders, with the proportion of founders with at least five years experience going up from 55 percent in 2017 to 82 percent this year.

FP Staff December 30, 2019 15:54:33 IST
Early-stage funding more than doubles in 2019; tech startups raise close to $14.5 bn: Report
  • Investors are more open to funding start-ups in the pre-revenue stage, which is reflected in the share of pre-revenue funded start-ups increasing to 17 percent this year from 12 percent in 2018, according to a report

  • Bengaluru, the National Capital Region (NCR) and Mumbai continue to form the core of the startup ecosystem

  • As many as 128 tech startups were acquired in 2019

Deals contributed hugely to early-stage funding in 2019 as compared to 2018. According to a report by Innoven Captial, early-stage funding was at a whopping Rs 693 crore in 2019, ie more than double, against Rs 334 crore in 2018, registering a 22 percent hike in the number of deals and a record 70 percent rise in the size of deals.

According to a report by InnoVen Capital, a venture debt firm, investors are more open to funding startups in the pre-revenue stage, which is reflected in the share of pre-revenue funded startups increasing to 17 percent this year from 12 percent in 2018. The report is based on inputs from reputed early-stage institutional investors.

The report also revealed that investors continue to show preference to backing more experienced founders, with the proportion of founders with at least five years experience going up from 55 percent in 2017 to 82 percent this year. This trend is driven by concept stage ventures launched by second-time entrepreneurs and experienced first-time operators.

Investors continue to show preference to backing more experienced founders, with the proportion of founders with at least five years experience going up from 55 percent in 2017 to 82 percent this year.

Earlystage funding more than doubles in 2019 tech startups raise close to 145 bn Report

Startups. Representational image. PTI

"Early-stage investment activity has been very robust this year, with increased deal flow, bigger transaction sizes and higher valuations," Ashish Sharma, CEO, InnoVen Capital India, was quoted as saying in an IANS report.

"The competitive intensity in early-stage has gone up, with a large set of institutional and angel investors looking to find the right opportunities," Sharma said.

The research revealed that Bengaluru, the National Capital Region (NCR) and Mumbai continue to form the core of the startup ecosystem.

The share of Bengaluru (37 percent) and Mumbai (20 percent) hovered around 2018 levels while the NCR saw a significant rise, increasing from 17 percent in 2018 to 29 percent this year.

Consumer Internet, enterprise tech/Artificial Intelligence (AI), fintech and ed-tech emerged as the most active sectors for early-stage investors.

Investors believe that this trend will continue but indicated that they would like to do more in enterprise tech & AI and fintech in 2020.

Almost 50 percent of early-stage investors felt that the valuations in 2019 were on the higher side due to intense competition for quality deals, said the report titled "InnoVen Capital: Early Stage Investment Insights Report 2019".

However, the majority (56 percent) foresee some correction in the valuations in 2020.

Tech startups raise record funding

Tech startups raised close to $14.5 billion in funding against $10.5 billion the previous year, according to a report, India Tech 2019 by Tracxn. Citing the report, Tech Crunch, said tech startups in India this year participated in 1,185 financing rounds of which 459 were Series A or later rounds — from 817 investors.

As many as 128 startups were acquired in 2019.

Of the venture capital funds this year, Sequoia Capital emerged as the most active, Tech Crunch said, with over 50 investments or co-investments. The others leading VCs were Accel, Tiger Global Management, Blume Ventures and Chiratae Ventures, the report said.

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