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VC investments in fourth quarter decline

By SiliconIndia | Friday, 09 January 2009, 03:22 Hrs | 1 Comments

Chennai: Global liquidity crisis has evidently affected to the flow of venture capitalist (VC) funds also as in the quarter ended in December, India witnessed VCs investment of only $81 million over 16 deals as against $275 million over 50 deals in the same period of the previous year, reported The Economic Times. The estimates are based on an India venture Capital Report by Venture intelligence and Global Indian Venture capital Association (GIVCA).

Overall, the VC investment in the year 2008 is worth $740 million across 125 seals, while it was $876 million from 144 deals during 2007. According to the experts a major portion of the fall happened in the last quarter of 2008 when world economy started feeling the bite of the credit of the credit-induced economic crisis that originated in the U.S.

Arun Natarajan, CEO, Venture Intelligence said, "Everything got affected in the October-December quarter. VCs are much better off because the money is already available as many closed funding before the middle of 2008."

According to Srini Vudayagiri, Managing Director, Lightspeed Ventures, the venture capital space in India is dominated by non-India funds that have strong linkages to U.S., Europe and even raise funds there. That could explain the tight liquidity situation. Also, in the current environment, VCs will thrust on value addition in existing portfolio companies rather than fresh investments.

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Reader's comments(1)

1: In the aftermoth of Satyam scandal, this article is very timely. I think the valuation of new companies are taking a beating. When established companies are available for a song, who will invest in the closely held companies. See the recent example of Espoir Technologies, the developers of products like Smarten Your English through Success Secrets and Smarten Your English through Love& Romance etc. A californian billionniare promised a fortune and later reduced his valuations. I think that is the reason Espoir Technologies refused to accept PE funding.

Posted by:Anusha Mathews - 09 Jan, 2009