case study on venture capital financing in india

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Dynamics of venture capital and private equity investments in india: an empirical analysis.

1. Introduction

2. related literature and theoretical framework, 3. data and methodology, 3.2. methodology, 3.2.1. kendall’s tau-b test.

• ψ 0 = ψ ( ψ − 1 ) 2 , where ψ is the data size
• ψ c = number of concordant pairs
• ψ d = number of discordant pairs
• ψ 1 = ∑ t j ( t j − 1 ) 2 , where t j = number of x values tied at j t h value
• ψ 2 = ∑ u k ( u k − 1 ) 2 , where u k = number of y values tied at k t h value
• ψ 0 ,   ψ 1 ,   ψ 2 = defined as above
• ψ 3 = ∑ v j ( v j − 1 ) 2 , where v j   = number of ( x , y ) values tied at both values
• ∅ y = number of swaps to re-sort x-sorted pairs by y .

3.2.2. Mann–Whitney U Test

• w = Mann–Whitney test statistics
• ∂ = size of sample 1
• ω = size of sample 2
• η 1 = median of sample 1
• η 2 = median of sample 1
• k = min ( w , ∂ ∂ + ω + 1   − w )

3.2.3. Kruskal-Wallis H and Tukey Post Hoc Test

• N = total number of observations across all groups
• g = is the number of groups
• n i = is the number of observations in group i
• p i j = is the rank (among all observations) of observation j from group i
• p i = is the average rank of all observations in group i
• p = is the average of all the p i j .

4. Results and Discussions

4.1. holding period and return multiple, 4.2. holding period and exit routes, 4.3. holding period and type of funds, 4.4. return multiple and type of funds, 4.5. return multiple and different exit routes, 5. conclusions, author contributions, data availability statement, conflicts of interest.

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Share and Cite

Dominic, J.; Joseph, A. Dynamics of Venture Capital and Private Equity Investments in India: An Empirical Analysis. J. Risk Financial Manag. 2023 , 16 , 475. https://doi.org/10.3390/jrfm16110475

Dominic J, Joseph A. Dynamics of Venture Capital and Private Equity Investments in India: An Empirical Analysis. Journal of Risk and Financial Management . 2023; 16(11):475. https://doi.org/10.3390/jrfm16110475

Dominic, James, and Anto Joseph. 2023. "Dynamics of Venture Capital and Private Equity Investments in India: An Empirical Analysis" Journal of Risk and Financial Management 16, no. 11: 475. https://doi.org/10.3390/jrfm16110475

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The Evolution of the Venture Capital Market in India

The case examines the early-stage venture capital industry in India, in 2004. The study is focused on technology-based early-stage venture capital, as opposed to private equity type investments. Using the past success of Draper International Fund as background, the case briefly visits the history and evolution of venture capital in India and current market opportunities. Next, it presents a basic framework for examining a venture capital ecosystem, and analyzes the promise of the Indian venture capital market in its context. The emergence of a strong Indo-US corridor is also highlighted, and comparisons are made with Silicon Valley, California, and Israel. This case can be used to illustrate the entry strategy options for foreign venture capitalists into the Indian market, evolving trends and investible opportunities in India, and for a basic framework of the ecosystem of a venture capital market.

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Venture Capital in India: Research Methodology and Findings

Cite this chapter.

• Mansoor Durrani &
• Grahame Boocock  

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Having set out the analytical framework in Chapter 7, this chapter opens with a brief discussion of the methodology adopted for the research programme. This is followed by a summary of the data gathered from the sample as a whole. The sample is then segregated on the basis of certain factors identified in the VC literature, and the data are used to investigate the validity or otherwise of the series of propositions set out in Chapter 7. The chapter concludes with a synopsis of our research findings under the three broad headings of valuation, structuring and monitoring of VC deals, and a brief summary.

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© 2006 Mansoor Durrani and Grahame Boocock

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Durrani, M., Boocock, G. (2006). Venture Capital in India: Research Methodology and Findings. In: Venture Capital, Islamic Finance and SMEs. Palgrave Macmillan, London. https://doi.org/10.1057/9780230626256_8

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DOI : https://doi.org/10.1057/9780230626256_8

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Management Research Review

ISSN : 2040-8269

Article publication date: 29 June 2020

Issue publication date: 30 November 2020

Staged financing is a prominent feature of the venture capital investment process. With staged financing, venture capitalists (VCs) may choose to either make an investment or delay it at each round. The purpose of this paper is to investigate the influence of market uncertainty, project-specific uncertainty and agency problems on these decisions.

Design/methodology/approach

The study uses data from Indian firms that received venture capital funding between 2000 and 2017. The duration between funding rounds is analysed using survival analysis. An accelerated failure time model is used to estimate the influence of market uncertainty, project-specific uncertainty and agency problems on the length of time between funding rounds.

VCs delay investment when there are high levels of uncertainty in the market; if market uncertainty increases by 1%, delay in funding increases by more than 6% (almost a month) on average. There is no statistically significant relationship found between the funding duration and project-specific uncertainty. Agency problems motivate VCs to invest sooner. An increase in agency problems results in a reduction of 55% (almost five months) in the length of time before the next funding round.

Practical implications

This study has useful business policy implications. It provides VCs with real option value drivers such as market uncertainty, agency problems, which influence the timing of decisions in staged investment processes. It will help to make the choice between investing and delaying at each round of financing more robust. Further, it is useful for VCs to differentiate between market uncertainty and agency problems against the backdrop of their different implications for staging decisions.

Originality/value

Few studies have examined staging decisions from a real options perspective in the context of a developed economy and very few from a developing economy perspective. This study increases understanding of staging decisions in the Indian context.

• Venture capital
• Uncertainty
• Real options
• Agency problems

Panda, S.N. and Gopalaswamy, A.K. (2020), "An analysis of timing decision in venture capital staged financing: evidence from India", Management Research Review , Vol. 43 No. 12. https://doi.org/10.1108/MRR-09-2019-0424

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Copyright © 2020, Emerald Publishing Limited

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VC funding for Indian startups up 42% to $6.3 bn in Jan-July: GlobalData

Investment growth despite a cautious global investment climate, says analytics company.

The increase in funding value despite a 1.2 per cent growth in deal volume can be attributed to big-ticket deals, said Bose | Photo: Shutterstock

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India Venture Capital Report 2021

Robust venture capital flows continue to play a pivotal role in the future of India’s economy.

By Arpan Sheth, Sriwatsan Krishnan, and Arjun Upmanyu

• March 17, 2021

The year 2020 was truly extraordinary for India, with Covid-19’s significant impact on the country’s economy and healthcare systems. GDP is expected to contract by 8% in 2020, as more than 65% of the Indian economy was at a halt during the full lockdown, which ended only in June 2020. However, latest forecasts by the International Monetary Fund (IMF) expect strong rebound in 2021, with growth returning to the long-term trend of 7% to 8% over 2022 to 2025. Within the year itself, Covid-19 played an important role in dramatically accelerating digital trends across sectors. This was reflected in venture capital (VC) money flows and the emergence of new, digitally founded business models across sectors.

Written in collaboration with

Despite Covid-19, a few investment themes continued from prior years:

• Strong deal flow, with close to $10 billion in VC investments—higher than in all previous years except 2019.
• Continued momentum in consumer tech and software as a service (SaaS).
• Significant fund-raising activity, with $3 billion raised by India-focused funds in 2020—40% higher than in 2019. Marquee funds including Sequoia, Elevation Partners, Falcon Edge, and Lightspeed all closed new funds for India investments in 2020 despite the pandemic.
• Growing number of start-ups (about 7,000 new start-ups founded in 2020, with more than 10% growth in seed stage deals) and unicorns (12 added in 2020 vs. 8 in 2019, to take India’s total to 37 now).

At the same time, there were a few themes that were different—driven or accelerated by Covid-19:

• Decline in average deal size by 15% vs. 2019.
• Surge in investment activity in a select set of sectors within consumer tech, including edtech, foodtech, gaming, and media and entertainment, with an average 4x increase in investment value over 2019.
• Slowdown in exits (70% lower exit value in 2020 vs. 2019), likely led by depressed valuations and disruption to business models.

In terms of key sectors receiving investments, consumer tech, SaaS, and fintech continued to lead the way, accounting for 75% of VC investments in 2020 vs. 65% in 2019. Fourteen of 22 VC deals were more than $100 million in size. Key subsectors receiving investments included edtech, foodtech, gaming, and media and entertainment in consumer tech; verticalised solutions within SaaS; and payments within fintech.

SaaS in particular saw clear signs of maturity, with average deal size increasing dramatically—from $14 million in 2019 to $25 million in 2020. We expect deal momentum in India to continue into 2021. Deal activity in the second half of 2020 recovered to pre-Covid levels: VC investments totalled $3 billion in January to March, declined to $1.1 billion in April to June, and then recovered to $3 billion each in the next two quarters. Further, the number of active VC funds grew to 520 in 2020 from 480 in 2019, with multiple new funds investing such as Inflection Point, Avataar, Coatue, D1 Capital, amongst others.

Overall exit value declined by 70% from $4.4 billion in 2019 to $1.3 billion in 2020. We expect recovery over the next one to two years as portfolios of top VC investors mature. (Most portfolios did not reach maturity in 2020, in addition to Covid-19 impacting exit valuations and disrupting business models across sectors.)

Overall, the strength of India’s VC ecosystem has driven real economic value for the country. VC investments have played a pivotal role in bolstering the start-up ecosystem in India—behind only the US and China, globally—and have created more than 3 million jobs directly or indirectly over the past eight years.

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Startup vc funding in india soars 42% to $6.3 bn in jan-july 2024, india accounted for around 7% share of the total number of vc deals announced globally during the period, according to latest data by globaldata.

Indian startups raised $6.3 billion in a total of 672 deals during the January-July 2024 period, seeing a 42.1% year-on-year (YoY) increase in funding value, despite a modest 1.2% rise in deal volume, the latest data put out by the U.K.-based data and analytics company GlobalData shows.

The spike in VC funding in the first seven months of 2024 can be attributed to high investor confidence in India’s startups, even amid cautious global market conditions, says GlobalData.

During the same period last year, India witnessed a total of 664 VC deals with disclosed funding value worth $4.4 billion during January-July 2023.

“The massive jump in funding value, despite a modest 1.2% growth in deal volume, can be attributed to some of the big-ticket deals announced during the review period,” says Aurojyoti Bose, lead analyst, GlobalData. Bose says it also proves that although VC investors remain cautious, there is no dearth of money for promising startups.

Some of the notable venture funding deals announced in India during January-July 2024 include $665 million worth of funding raised by Zepto, $300 million raised by Meesho, $216 million worth of funding raised by PharmEasy, $150 million worth of funding raised by Radiance, $148 million worth funding raised by Kogta Financial and $120 million worth funding raised by Rapido.

“India, apart from being a key Asia-Pacific (APAC) market for VC funding activity standing just next to China, is also one of the top five markets globally in terms of both VC funding deal volume and value,” says Bose.

India accounted for around 7% share of the total number of VC deals announced globally during January-July 2024 while its share of the corresponding disclosed funding value stood at 4.3%.

Despite global economic uncertainties, India remains a key market for VC activity, driven by a robust pipeline of promising startups that continue to attract significant capital. “This trend reinforces India’s position as a critical player in the global venture ecosystem, demonstrating resilience and growth even amid cautious investment sentiment,” says Bose.

India remains the “fourth-highest funded country globally” in the tech startup landscape, a recent report by market intelligence firm Tracxn said. The first half of the fiscal year saw three new unicorns, a rise from none in H1 2023, alongside 33 new additions to the Soonicorn club. New IPOs also rose to 20 in H1 2024, from 6 in H1 2023 and 12 in H2 2023. Some of the top companies that went public included TBO, TGIF Agribusiness, Radiowalla and Trust Systems & S/w. In location, Bengaluru emerged as the leader in total funds raised during this period, followed by Delhi and Mumbai. The overall top investors in H1 2024 were Accel, Blume Ventures and Peak XV Partners.

Follow us on Facebook , X , YouTube , Instagram  and WhatsApp to never miss an update from Fortune India. To buy a copy, visit Amazon .

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