Venture capital firms and equity firms are raising lots of money to invest in India, but avenues of investment are drying up. This year more than $1,900 million have been raised by private equity and venture funds (PE VC) focused on India.
PEVC funds becoming more discerning in Investments
With a few areas, particularly on the customer side, developing, and with a lot of startup disappointments, PEVC funds have been forced to become more discerning in their investments.
Funds lying down as Dry Powder
Startup investigate firm Venture Intelligence assesses that almost $15 billion of assets is lying as dry powder, the most astounding measure of free money to date sitting and holding up to be waiting to be invested in Indian ventures.
Dry powder leads to lower internal Rate of Return (IRR)
High slashes of dry powder prompt different results one is a lower internal rate of return (IRR); another is that chiefs under strain to send may convey cash in under appealing speculation openings,” says a PE fund manager who did not have any desire to be named.
Views of Parag Dhol
“Today, everyone is trying to stick to B2B and is avoiding B2C” said Parag Dhol, MD of Inventus Capital. He says the business of investing is cyclical and it’s a matter of time before there’s a recovery.
He further said that “2015 saw a mad rush (of investments). Many investors bit off more than they could chew. I think they are still trying to digest what they have eaten. In 2017, the focus is more on trimming their losses and not new investments. So it’s bound to be a relatively dull year.”
Innovation as the way to Find Avenues of Investment
Innovation, ultimately, is the only way out even for funds to find avenues of investment. And that could yet happen. Time and again, the Indian tech industry has proved the cynics wrong. “It’s a matter of time before many working in R&D centers like AI, machine learning, robotics come out to establish their own ventures that innovate using these technologies for both India and the world. And many of them will be eminently fundable,” says an industry analyst who did not want to be named.