Back Amid funding winter, Sequoia and Accel lead VC investmentsshankar
Sequoia Capital led venture capital investments in India in 2022, completing 71 deals as of November, although it was 30% fewer than the 103 it struck in the year earlier, data from market analytics platform Venture Intelligence showed.
Venture capital firms also faced a funding crunch in 2022, leading them to reduce ambitious bets. VC firms closed 1,075 deals in India in 2022 until the end of November, compared with 1,212 transactions in the same period the previous year.
However, deal sizes saw a significant decrease in 2022 despite a smaller drop in the number of transactions due to a decline in late-stage funding activity. As a result, venture capital investments by size fell about 34% to $23.2 billion in 2022 (as on 30 November) from $35.4 billion in the same period the previous year.
Despite the challenging market conditions, Sequoia maintained its leading position in recent years through its focus on early-stage venture and growth deals in India and its accelerator programme, Surge, which incubates and funds fledgling startups. Some of Sequoia’s investments in 2022 include climate-focused firm Climes, influencer platform Rigi.Club, fintech startup Hubble, and B2B sales and intelligence platform Apollo.io.
Sequoia was also the leading investor by volume in 2019 and 2020, completing 87 and 88 deals, respectively, from January to November. The venture capital firm, which has been investing in India since 2006, raised a record $2.85 billion across three funds to support startups in India and South-East Asia, indicating that it has sufficient capital for the next few years.
Rival Accel invested in 54 startups in India until November, maintaining its position as the second most active VC firm in India but closing 19% fewer deals this year. The VC firm also announced its seventh India- and South-East Asia-focused fund with a $650 million corpus in March. The firm’s commitment to the startup ecosystem in India and SouthEast Asia region has increased to over $2 billion so far. Sequoia Capital and Accel did not respond to requests for comments.
Deal flow is expected to improve in 2023 from the current year but will not reach 2021 levels, according to Kashyap Chanchani, co-founder of The Rain Maker Group, a technology-focused investment bank.
“There aren’t major recession worries in India, and the inflation numbers for the US have also improved. So, largely, it is expected that towards mid-year (2023), there should be more business-as-usual. (However,) deals won’t be anywhere close to what we saw last year or the former half of this year,” Chanchani said.
Pune-based Better Capital stood third in the list of most active investors in 2022, with 52 deals this year.
“We have been extremely clear on our entry price. In 2023 (as well), we’re going to be stricter on pricing,” Better Capital’s founder and CEO Vaibhav Domkundwar said.
Blume Ventures completed 44 deals until November and closed its fourth fund at over $250 million, surpassing its target corpus of $200 million.
“We broadly invested across SaaS (software as a service), financial services, climate tech and consumer businesses in 2022,” said Ashish Fafadia, partner at Blume Ventures.
Interestingly, Tiger Global made 50 deals in 2022 until November, compared with 54 for the same period in 2021, but cut smaller checks this year. Tiger Global did not respond to requests for comments.
Matrix Partners was also active in India. “2022 made for a better hunting ground relative to 2021, which was marked by a frenzy of investing activity where valuations, velocity and volume of deals all spiked. Part luck and part foresight, we didn’t end up finding as many compelling opportunities in 2021. Some things just didn’t make sense—either from a valuation standpoint or perhaps we didn’t appreciate the ideas we were seeing,” said Tarun Davda, managing director at Matrix Partners