The liquidity crisis has so far not hurt venture capital (VC) investments, which are typically early stage and growth stage. The investment figures for the second quarter ending September 2008 indicate VCs invested $290 million across 49 transactions, representing a healthy 36% growth in volumes and 15% in terms of value over the corresponding quarter of the previous year.
The figures for the immediately preceding quarter, ending 30 June 2008 were $ 165 million across 28 deals, according to Venture Intelligence, a firm which collates information on VC investments and exits in India. A majority of these deals in 2008 were early stage investments, while about 39% were growth stage investments, according to VI CEO Arun Natarajan.
In the first nine months of 2008, VC investments accounted for 40% of all investment transactions taking into account investments by private equity firms, buyout firms and VCs. In all, VC firms concluded 108 deals with a total transaction value of $ 678 million, during the nine months to September 30, 2008.
But the good times may not last long as investors become more risk-averse and hold back money for asset classes that are percieved to be more risky, such as venture capital and the emerging economies of India and China, said Sumir Chadha, managing director, Sequoia Capital India, and chairman of the Global Indian Venture Capital Association (GIVCA). The GIVCA, earlier known as the US-India Venture Capital Association, represents around 40 VC firms that together account for approximately $ 5 billion of committed capital.
Alok Mittal, managing director, Canaan Partners and a GIVCA member, said he expected VC investment activity would not slow down but would not jump either because of the current financial crisis. Admitting that the industry had hit a rough patch, Mark Sherman, general partner of Battery Ventures, said they were still exicted by the growth opportunities here.
Source: Economic Times