Startups that require financing frequently look to venture capital (VC) companies. They can offer financial assistance, strategic guidance, introductions to prospective customers, partners, customers, and more.
The year 2020 saw Indian companies raise more than $1 billion in more than 1200 deals. Although the total amount was lower than that of 2019’s $14.5 billion figure, the number of deals increased by 20 percent. VC Funding for startups has been on the rise since the inception of smartphones and the rise of internet-based companies.
Venture capital financings aren’t straightforward as the process is a bit complicated. Entrepreneurs are better equipped to get venture capital financing if they know the procedure and the expected contract terms. They have to be prepared for the possible issues that come in the way of getting funding. In this article, we present an outline of venture capital financings.
The term venture capital can be described as private equity financing that venture capital companies or funds. In venture capital funding, investors offer to invest in early-stage emerging startups that are believed to have high growth potential or have demonstrated significant growth.
For venture capital investment, VC investors need to consider the following aspects:
- The startup idea should be promising with growth potential to grow.
- The investment should be long-term for better growth potential, like from two to ten years.
- The business should have had invested in shares of established business enterprises that hold a strong history of profits.
- Once the funding is done, the investor must remain active.
Venture capital funds or firms invest in these early-stage businesses to exchange equity and an equity stake. Venture capitalists assume the risk of funding uncertain start-ups with the expectation that some of the businesses they help will be successful.
Because companies starting up are prone to uncertainties, venture capital investment has exceptionally high failure rates. Start-ups are usually founded on an innovative business or technology and typically come from high-tech industries like information technology (IT), biotechnology, or clean technology.
Technology-focused Venture Capital Firms in India:
Technology-focused Venture Capital Firms, Ten years ago, only four or five significant Indian venture capital funds made secure bets, mainly in the corporate sector. Some of the more adventurous funds supported e-commerce giant Flipkart and electronic wallet Paytm and Olathat, a ride-hailing company. Olathe already had attracted the attention of investors from around the world.
The main reason for the lack of Indian venture capitalists could be because the startup scene was still in its beginnings, and there weren’t numerous appealing investment options.
Rise of VC in Diversified Areas:
There are currently more than fifty-five unicorn companies in India. There is rapid growth in the number of startups launched and the array of technologies they’re experimenting with venture capital funding.
The increased number of investment options has given India the confidence to put bets on local businesses. For example, in 3one4’s portfolio, you can find online meat delivery firm Licious and human resources software platform DarwinBox Digital Banking App Juniper and companies in the digital space like Pocket Aces, among others.
In addition, with bets paying off, the risk appetite is growing among new startup founders. The fin-tech sector is also rising, and some new start-ups for single-brand ideas like Licious and Mamaearth.
The development of the startup ecosystem in India is phenomenal, even in the midst of the outbreak. In reality, it is said that there are several companies online in various industries, such as entertainment, groceries, and ed-tech have profited from covid-19 lockdowns.
Top-Notch Venture Capital Investors Worldwide:
Tiger Global Management:
The firm was established around 2001, with the help of Julian Robertson. The firm has focused on technology, the global internet, telecoms, media consumption, and industrial sectors. They invest in the early-stage venture, the late-stage venture, post-IPO Private equity, and the secondary market.
In the past, it has made 551 investments and made 82 exits. In the year 2019, Tiger Global Management raised $50 million from Zenoti. A few notable investments made through Tiger Global Management are Urban Company, Flipkart, Moglix, OPEN, Ninjacart, Razorpay.
Soft bank:
Softbank was founded in 1981. They invest in early-stage ventures, late-stage investments, venture capital, and seed. The company has received financing from various industries, including Internet technologies, finance, technology media and marketing, the design of semiconductors, and broadband. So far, it’s invested 258 times and made 59 exits.
In 2011 it made its debut in the Indian market with 200 million dollars in InMobi. Since then, the company has invested in startup businesses like Ola, Uber, Paytm, Delhivery, Grofers, Firstcry, Policy Bazaar, Snapdeal, Hike, etc. The goal for Softbank is to invest $10 billion into various segments of the Indian market by 2024.
Another striking pattern is the rising deal with unconventional VC investors, like hedge funds, mutual funds, corporate investors, and cross-investors. In addition, the proportion of investors who are angels has grown larger and reached their goal of investing in startups.
