VC funds still available for technology start-ups
By siliconindia   |    2 Comments
Printer Print Email Email
VC funds still available for technology start-ups
Bangalore: The recession is proving to be a blessing in disguise for many Venture Capital (VC) companies. For many of them who have recently raised capital, the slow-down in the market means a slow-down in the competitions too. So firms see this as a great opportunity to make some serious long-term bets, writes Alok Mittal, Managing Director, Canaan Partners India, in Business Standard. VC firms are focusing on areas where the customer demand is unaffected. Technology-oriented businesses that deal with consumer internet, mobile VAS, education and healthcare businesses, are continually doing well. The bar for start-ups to raise capital has gone up, the author says, adding, "Capital is more selective today than it was few months back. Besides a stricter industry selection as mentioned above, the premium on capital efficiency of businesses has gone up as a selection criterion." The good news is that start-ups that deserve to get capital will still find it - if earlier the success rate was 5 percent, now it might be 4 percent, not a whole lot of difference in odds. VCs also do not want to under-finance companies, and are ensuring that the current capital infusion takes them through at least 18-24 months, which is the expected time when outside fund-raising environment starts to recover. Nowadays, valuation is less critical a criterion in early stage investing. In early stage ventures, valuations are a means of balancing and aligning interests of all stakeholders, and are not based on revenue or profit multiples. To that extent, while there is a mild softening in first rounds of investment, the larger impact of declining valuations is only visible in later stage companies. The great part is that so far, the deal flow volumes and quality have not suffered. This is really the lifeblood of venture investing, and collectively venture capital firms must continue to foster an environment in which high quality entrepreneurs continue to create companies. This is also a time when VCs in India will get tested for the first time. First, they will get tested in how they support their portfolio companies. Second, venture firms will be able to test their syndicate partners on how they perform under adversity.

Digital Supply Chain Transformation – Winning the AI/ML Way