Happy 2012 to all readers. 2011 has been an eventful year for venture capital in India – perhaps a record year in terms of overall volume of financing. More importantly, traditional growth equity firms stepped in and provided later stage support to venture backed companies, which augers well for entrepreneurs and venture industry. While in the middle of the year, valuations, especially in ecommerce were beginning to look heady, over past 90 days we have seen some sense return – in the long term, thats good news. Predicting a year out is always tough, but seems like venture capital is getting its roots entrenched – hoping for a great year 2012.
2011 was actually a bit of a disappointment on the exit front. Public markets were choppy throughout the year in India, and globally in the latter half. We track a pipeline of a dozen plus venture backed companies (largely internet related), which could be half a billion or more in value – however, the primary exit theme for most of those is IPOs. So 2012 outlook might again be driven more by health of the markets, than by availability of a good pipeline. Investors may start thinking about diversifying their exit options – both in internet companies where traditional thought in India has been around IPOs (for lack of M&A market), but also in terms of looking at investment areas where the dependency on IPOs is lesser (good old outsourcing).
In terms of themes, 2011 was clearly the year of ecommerce. Interestingly, every year over past 5-6 years has had a “never before, never after” flavor to it – 2006 (Mobile VAS), 2007 (Education, Real estate), 2008 (Healthcare, Retail), 2009 (Microfinance), 2010 (Rural, Agri) and so on. Not many themes have continued the momentum – I do hope ecommerce does. And for 2012, may be we will be back to Mobile VAS (yes, times are changing there), or may be finally Enterprise/SMB software. Any bets?
One element that has continued to keep the confidence going around is increasing quality and quantity of startup entrepreneurs. Here’s wishing 2012 continues to build on that!
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Very interesting analysis, particularly the year-wise themes. Even though they have not continued the momentum, in a way those could be the VCs’ way to test various sectors and the growth in them, so one would expect a VC to monitor how a venture is doing, before touching another one in that sector.
The proliferation of web startups (not necessarily e-commerce but many ‘social’) is also an interesting phenomena. Some of them are copycats, but there are many other experimental ventures. VCs would usually be skeptical if they’d scale, but from an entrepreneur’s perspective, it’s worth a try.