About 25 venture capital investments from the US will be made in Indian companies in every quarter of 2007, according to a recent VC market study.
However, high expectation-based valuations would continue to be the key challenge in getting deals done in the country, said the study conducted by the US-India Venture Capital Association (US-IVCA), a US-based non-profit organisation, and Venture Intelligence.
The first quarter (January-March) of 2007 saw domestic companies receiving VC funds worth $130 million in 20 deals. In the same period of 2006, it was a little over $100 million and in 2005 it was $37 million in 14 deals.
“It's interesting that during this period, VC investors looked at innovative companies in the areas of enterprise software and even micro-finance, deviating from the traditional focus on outsourcing and internet-based services,”said Arun Natarajan, founder & chief executive officer, Venture Intelligence.
The first quarter of 2006 had witnessed a sudden spurt in VC investments, specially in sectors like internet-based services and mobile value added services, due to the simultaneous foray of US-based funds like DFJ, KPCB, Sherpalo Ventures and Norwest Venture Capital into India.
Year 2006 as a whole had seen VC volumes worth $508 mn in 92 deals, against $268 mn in 44 deals in the year before. The momentum is such that 2007 will bring in investments worth $1 billion, said industry analysts.
A significant number of early-stage investments are also taking place, in the $1-$3 million range, that would further help develop the VC ecosystem in the country, said Sudhir Sethi, director, US-IVCA and managing director, IDG Ventures India.
The highly successful IPOs of three VC-backed companies during the first quarter of 2007 provided a boost for the venture industry.
MindTree Consulting, an IT services firm funded by Walden International and Global Technology Ventures, raised $53 million through its initial public issue in February.
Other successful VC-backed IPOs during the quarter included that of BPO firm FirstSource, and the television news company Global Broadcast News.
The quarter also witnessed successful exits of VCs via the M&A route in companies like software testing firm RelQ, BPO firm Global Vantedge and radio channel Music Broadcast, said the study.
Source : Times of India