The years 2014 and 2015 were boom years for VC investing in India. Fuelled by venture capital firm Tiger Global’s big bets, there was a sea change in perceptions and expectations around funding norms and numbers.
But it was a false dawn.
2016 saw the tempering of this bullishness.
2017 was largely a wait-and-watch year.
2018 was different.
Let us count the ways.
The nearest exit
While there has been a large amount of funding entering India over the past five years, there has not been a commensurate rate of exits to justify these investments. Until 2018. According to data provided by company financials database Venture Intelligence, 2018 saw a six-fold increase in exits relative to the previous year. For the first time ever, the total money returned to LPs through exits exceeded the capital invested into Indian startups in a calendar year.
If this makes for heady news, the chart below provides for a sobering read.
In a deal valued at $16 billion, multinational retailer Walmart’s acquisition of Indian e-commerce company Flipkart delivered cash returns of over $12 billion to investors, founders and Flipkart employees. While startups exits have always known to operate under a power law where the size of the winning outliers are disproportionately larger than the rest of the herd, Flipkart’s mega-exit skews the overall exit numbers for the year and hides the fact that if you take this deal out of consideration, things are pretty much business as usual when it comes to exits in India. There were no IPOs worth speaking about and the vast majority of mergers and acquisitions in the top 10 list involved companies that are not technology startups.
That said, thanks to the likes of multinational SoftBank, there were a number of secondary exits in companies such as hospitality company OYO and edu-tech company Byju’s which helped many Indian VCs report stellar performances to their LPs.
But beyond the leaderboard, there were some seemingly small but meaningful exits in 2018 that proved that given the right economics, small can be beautiful. Software company Mettl and cloud solutions company Minjar were good representative examples of this dynamic at work.
The year that was for Indian VCs
The chart above shows how the major Indian VCs invested in 2018.
While the jury might still be out on whether VC investing in India has come of age with demonstrating meaningful IPO-type exits, there is no doubt that 2018 was a bumper year for Indian VCs in India.