Global VC investment drops in Q1: KPMG report

India saw good VC activity in Q1 2019, including a $413 million raise by Delhivery, and a $300 million round by ride-hailing platform Ola. But compared to the last two quarters, the amount of capital coming into India has slowed down.

India took a backseat in the global venture capital (VC) investment in the first quarter of 2019, according to a report by KPMG. Titled ‘KPMG Venture Pulse’, the report stated that while VC investments dropped across major categories, India witnessed a positive growth as automotive services companies gained ground.

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While India did not see any $1-billion-plus rounds this quarter, the country attracted several $100-million-plus deals, including a $413-million round by ecommerce-focused logistics company Delhivery, led by the SoftBank Vision Fund – an investment that elevated the company to unicorn status. SoftBank was particularly active in India in Q1 2019, also making a $60-million investment in online grocery company Grofers, and $149 million in baby clothing e-tailer FirstCry.

However, automotive services companies were a big hit with investors in the first quarter of 2019, led by ride-hailing company Ola Cabs, which received $300 million from Kia Motors and Hyundai Motor Company as part of a plan to develop electric vehicles.

Automobile marketplace platforms also continued to receive attention, a trend expected to continue for the next several quarters. During Q1 2019, car trading platform CarDekho raised $110 million in Series A round.

In India, VC investors might be somewhat cautious in second quarter of 2019 due to the general elections. However, this caution is expected to be short-lived. A number of investment areas are expected to be hot through to the end of the year, including automotive trading platforms. VC investment in edtech is also poised to see substantial growth in the near future.

“Edtech has the potential to become a truly breakout sector in India. The sector has evolved from companies simply offering online digital classes and providing access to both online and offline tutorial offerings, to now offering even more innovative options. With no clear leader in the space, many companies are competing to develop content and raise funding. It is anyone’s game – which will make the next few quarters is very critical,” said Nitish Podar, Partner and National Leader, KPMG.

The downturn in the final quarter of 2018 carried over into Q1 of 2019, as much of the APAC region saw sluggish investment activity. That may be due to more temporal aberrations than any key underlying factors, and additional data will have to be observed in other quarters to render a verdict.

Sources say that the deal sizes will increase in the next two quarters depending on the election results. Currently, India lags behind China in the size of investments. In the same period, China raised more than $5 billion in capital in 50 deals.

Also read: Volumes fall, but PE and VC investments hit record high in Jan-Mar: Venture Intelligence report


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