Exemplified by the recent $200mn series E funding for Bangalore- based Flipkart, less than a year since its previous $150mn funding, Preqin's Venture Deals Analyst shows that venture capital activity in India is becoming increasingly robust.
Between 2008 to 2009, the number and value of venture capital deals in India decreased by 20% and 30% respectively, however from 2009 onwards we have seen a steady increase in activity. From 93 financings with an aggregate value of $612.8mn in 2009, 2010 saw 128 deals with an aggregate value of $1.06bn, a 73% increase in value on the previous year. This trend continued into 2011, where 220 financings are recorded, reaching an aggregate value of nearly $1.5bn. There was a further 35% increase in the number of financings between 2011 and 2012, from 220 to 296 deals, with a combined value of over $1.6bn. Figures in 2013 so far have already surpassed those from 2009, which was the weakest year throughout the period in terms of deal flow and value since 2008. Preqin’s data shows that 152 deals have already been announced this year, totalling nearly $787mn.
Despite the steady increase that has occurred in deal activity, the average deal size for venture capital deals in India has shown more fluctuations. 2008 saw an average value of $10.4mn per deal, and in 2009 this figure was $8.9mn. The average deal size peaked in 2010, reaching $10.8mn – an increase of over 20% on the previous year. Since 2010, average deal sizes have been of lower value, at $9.8mn and $8.2mn in 2011 and 2012 respectively, and at $8.8mn so far this year.
This decline in average deal size coincides with an increase in the proportion, in terms of number of deals, of generally lower value angel and seed round financings for Indian portfolio companies over time. In 2010, where we witnessed the peak average deal size, seed and angel financings made up only 12% of the total recorded by Preqin. 2011 saw an increase to a proportion of 15%. Between 2011 and 2012 this proportion shot up 13 percentage points to 28%, and in 2013 so far, angel and seed financings have contributed to over a third of deals at 35%.
Regardless of the drop in average deal size, there has been a strong increase in venture capital activity in India since 2009, in terms of both the volume of financings and the aggregate deal value.