Growth of venture capital (VC) deal value and volume in India has surpassed China’s in the first three quarters of this calendar year, thanks to the rising investor caution on the neighboring country’s crackdown on its technology industry.
VC investors have poured in about $20 billion into Indian companies during the first nine months of 2021, which marks an increase of 150 per cent from the same period last year as against a 97 per cent growth in China where deal value increased from $34 billion to $67 billion, according to data from the tech intelligence firm, CB Insights.
India’s VC deal volumes and values reached record highs in the third quarter of this calendar with 519 companies raising a total of $9.9 billion compared to $3.3 billion across 288 deals in the same period in 2020. Early-stage deal share in India’s venture capital funding grew up to 75 per cent till October 2021 as against 58 per cent in China.
According to a study by Asian Venture Capital Journal, as reported by Financial Times, for every dollar invested in Chinese tech firms, VC funds put in $1.50 on Indian tech start-ups during the July-September quarter. The report further added that growth stage deals in India’s tech sector grew 287 per cent during the first half of the year against a 118 per cent increase in China while number of deals until October jumped 62 per cent versus a 47 per cent growth in the Chinese tech sector.
The growth slump in Chinese venture capital funding could be the result of authorities increased scrutiny of tech companies in the country. The government’s months-long regulatory crackdown has impacted several leading tech firms across sectors such as e-commerce, education, gig economy, and online insurance. The crackdown has wiped off more than $1 trillion of collective market capitalisation of some of China’s tech giants including Tencent and Alibaba since February.
The CB Insights report titled ‘State of Venture’ that analyses dealmaking, funding, and exits in private-market companies revealed venture capital funding in China grew 26 per cent quarter-on-quarter (QoQ) in Q3 (calendar year) to reach $25.5 billion while funding in India jumped 68 per cent QoQ and an astounding 195 per cent YoY to $9.9 billion.
Asia funding dollars rose 95 per cent year-on-year (YoY) to reach a record of $50.2 billion and Asia’s share of global equity funding rose from 26 per cent in Q2’21 to 32 per cent in Q3’21, the only major region to see share growth QoQ. With 41 per cent, Asia’s deal share exceeded the US’ in Q3’21.
Social commerce firm Meesho ($570 million), ride-hailing company Ola Cabs ($500 million), food delivery startup Swiggy ($450 million), and edtech firms Unacademy ($440 million) and Eruditus ($430 million) raised the top five equity deals in the third quarter.
In fact, Meesho’s $570 million fundraising found a place among the global top 10 Series E+ deals in Q3’21.
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Four Indian start-ups — Delhivery, Swiggy, Pine Labs, and Shiprocket — were among the top ten companies globally that raised funding in Q3’21 by Mosaic score, a quantitative framework that CB Insights deploy to measure and predict the health and future success potential of private tech companies.
Edtech platform Eruditus was ranked among the global top 10 new unicorns by valuation and PayU’s $4.47 billion acquisition of BillDesk was among the global top 10 M&A exits in Q3 by valuation.
With 33 deals contributing 0.9 per cent of total Asia quarter deals, Sequoia Capital India was the only Indian VC in the list of top 10 Asia-based investors in Q3 by company count.
As per a recent report jointly published by IVCA and EY — which has taken into consideration all private equity and venture capital investments in India — the PE/VC deal activity significantly exceeded the previous all-time highs.
“YTD (year to date) October 2021, PE/VC investments have recorded $65.6 billion, 38 per cent higher than the previous annual high recorded in 2020 and exits have recorded $38.7 billion, 43 per cent higher than the previous calendar high recorded in 2018. October recorded $12.9 billion in PE/VC investments over 127 deals and $5.1 billion across 24 exits,” the report said.
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