BANGALORE, MUMBAI and NEW DELHI, India — Venture capitalists invested more than $777 million in 57 deals for entrepreneurial companies in India during the first three quarters of 2007, according to the Quarterly India Venture Capital Report published for the first time today by Dow Jones VentureOne and Ernst & Young. This was nearly five times the $158 million invested during the first nine months of 2006 and more than twice the annual investment record of $320 million set in 2005.
The report covers venture capital investment specifically, which Dow Jones VentureOne defines as growth capital made available to entrepreneurial companies in exchange for ownership in the form of private securities. These investments are often seen as shorter-term and do not include private equity investments such as leveraged buyouts or mezzanine and debt financing.
The report showed 54% of all venture deals in India were for companies in the Information Technology (IT) categories, as 31 rounds were completed in the first nine months of the year, accounting for more than $327 million worth of investment.
“Though the majority of financing rounds in the first nine months of 2007 were struck in the IT industry, the Business/Consumer/Retail industry attracted the most venture capital with $376 million invested during this period. The median amount invested in a Business/Consumer/Retail round of financing reached $12 million, double the median round size in IT. This reflects a significant trend reversal compared to 2006, when both industries showed a similar median amount invested of approximately $9 million,” said Dilip Dusija, Ernst & Young's, Venture Capital Advisory Group leader in India.
Within India's IT industry, the first nine months of 2007 saw more than $113 million invested in 17 deals in the Information Services sector, a four- fold increase over the $27 million invested in this sector during the same period last year. Information Services includes many of today's Web-based innovations, such as mapping services, social networks and online advertising.
Also of note, venture capitalists committed $95 million in eight deals for Communications and Networks companies in India during the first three quarters of the year, the most deals and investment for the sector on record.
The data also showed that service-oriented companies were also a popular draw for venture capitalists investing in India's Business/Consumer/Retail industry. Overall, the industry accounted for 21 deals and $376 million worth of investment in the first nine months of 2007, but $329 million — or 88% of all investment in the industry — went to 17 deals in the Consumer/Business Services sector.
“One reason service-oriented companies in India are so attractive to investors is because they often do not require a great deal of capitalization to get off the ground,” said Jessica Canning, Director of Global Research for Dow Jones VentureOne. “This is reflected by the fact that 88% of all venture capital investment in India in the first nine months went to companies that are already generating revenues.”
Early stage deals accounted for 63% of all investment activity in India in the first three quarters of 2007 with $490 million invested in 42 first rounds and three seed rounds.
The investment figures included in this release are based on aggregate findings of VentureOne's proprietary Chinese research and are contained in VentureSource. This data was collected by surveying professional venture capital firms, through in-depth interviews with company CEOs and CFOs, and from secondary sources. These venture capital statistics are for equity investments into early-stage, innovative companies and do not include companies receiving funding solely from corporate, individual, and/or government investors. No statement herein is to be construed as a recommendation to buy or sell securities or to provide investment advice.
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Dow Jones VentureOne ( www.venturecapital.dowjones.com ), a unit of Dow Jones Financial Information Services, has been the leading provider of finance and investment data to the venture capital industry for 20 years. VentureSource, a sophisticated electronic database on the venture capital industry, is published by VentureOne. Dow Jones produces sector-specific products and events for the private equity, venture capital and diversified markets including VentureWire, Private Equity Analyst and Daily Bankruptcy Review.
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