VC fund inflows nearly halve in June quarter to $1.4B: Report

Fund inflows through the venture capital route halved in the June quarter to around $1.4 billion across 150-odd deals, making it one of the worst quarters for the industry as the COVID-19 pandemic has taken a heavy toll on investor sentiment, says a report.

The pandemic has hit overall deal making activities too, except for the massive fund raising by Reliance Industries through its telecom arm Jio Platforms, which contributed to nearly half of the $43.5 billion inflows into the country in the first two quarters of the year.

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"After outperforming China in VC investments in the fintech sector in the March quarter, fintechs continued to be the strongest area of focus for them in the June quarter as well led by the $397 million raised by lending company Navi Technologies," according to the data collated by KPMG International.

But the overall VC inflows nearly halved to $1.4 billion across 150-odd deals from close to $2.9 billion in the same period last year through around 170 deals, it said.

However, the agency is bullish on the inflows going forward, despite the pandemic-driven slowdown, "because the country remains a key market for investors. The interest in India is expected to help keep VC deals occurring, if at a slower rate and even Q3 will may also be soft, it is bound to rebound by the end of 2020."

"India is a very attractive market for VC investors. While funding is likely going to be muted again in Q3 due to the pandemic, investment is expected to pick up again by the end of the year," Nitish Poddar, partner and national leader for private equity at KPMG India, told PTI.

"Fintech remains one of the most attractive sectors for investment in the country, in addition to healthtech, medtech, and gaming. Over the longer-term, agritech is well-positioned to see increasing investment too," he added.

Given the situation prevailing today, business models are being challenged and there are clear winners and losers, according to Poddar.

He foresees "some of the existing businesses, including those which are at a slightly mature stage of evolution getting higher traction if they reinvented their model. They will also be able to get a larger pie of the business, which seemed to have clearly shifted from the brick-and-mortar play to the technology side."

Globally, VC investments remained robust, reaching $63 billion, of which close to $13 billion changed hands across Asia led by China, Japan, Singapore and India.