Though witnessing a slight decline in the investment front, IT and IT enabled services (IT & ITES) still remain to be the preferred space for Venture Capitalists (VC). In the first quarter of 2008, the sector has attracted $87 million worth VC investment over two-thirds of the total of such investments happened in India across several sectors during this period. The quarter witnessed a total of $144 million VC investments pumped into various sectors, says a latest report by the research firm Venture Intelligence Service.

While the IT and ITES sector witnessed 14 deals through which VC money flowed into it during the quarter, the total number of deals happened across different sectors was 21. However, the statistics shows a sharp decline in investments this quarter compared to the corresponding period of the previous year, which had registered 28 deals worth $173 million.

Online Services companies dominated the quarter accounting for a 75 percent share of the invested capital. The maximum VC investment was attracted by online travel portal Cleartrip.com about $18.5 million from DAG Ventures. Apart from Cleartrip, online verticals like classifieds (Kijiji India), e-commerce (FutureBazaar), education (StudyPlaces), and e-cards (123Greetings.com) were among the VC’s favorite picks.
Following Cleartrip.com in investment attraction was Deeya Energy, which received $15 million investment from New Enterprise Association, while Soham Renewable Energy got $15 million from DE Shaw. At the same time, Ikya Human Capital attracted an investment of $8 million from India Equity Partners.

Though there has been a lull in the total number of deals this quarter, a significant growth in terms of the size of the investments was visible.

“About 10 out of 21 deals during the quarter came within the range of $5-10 million, while six deals stood at a range between $2 and $5 million,” said Venture Intelligence CEO Arun Natarajan.

Interestingly, the study found out that about 62 percent of VC investments during Q1 2008 were in the early stage segments, or in companies which were less than five years in the business and were not part of larger business groups. So startups go ahead, VCs are out there for you!