PE/VC sees 65% YoY drop in April 2020

Chennai: In an indication of tightening purse strings, private equity and venture capital funding dropped 65% YoY, by value, in April 2020, at $931 million from $2.7 billion a year ago. VC funding alone stood at $487 million, a YoY drop from $614 million The investments were made across 67 deals at a drop from 91 deals in the same period, the previous year.

Cautious investors are placing their bets on sectors that currently have assured returns. Most of the investment went to fintech, edtech, healthtech and e-commerce. Top deals include investment in SP Infra, DMI Finance from private equity players, while VCs placed their bets on e-grocery delivery and healthtech firms BigBasket, MedGenome respectively, which saw a jump in business during the Covid-led lockdown. Edtech companies such as Byjus and Vedantu also saw money being pooled in. Another clear trend emerging is bridge rounds: portfolio companies raking in funds from existing investors. BigBasket saw $60 million being pooled in from Alibaba and beer brand Bira brought in $30 million from existing investor Sequoia. Other bridge rounds include BankBazaar securing money from Amazon.

The funding numbers also show a month-on-month decline in investor interest. The total investment made is also lower than March 2020 numbers, which saw $1 billion being spent by VC and PEs. Funding in familiar sectors also saw a jump.

Arun Natarajan, MD, Venture Intelligence said that the numbers indicate that these deals are in existing late-stage startups in a bridge round. “This is just fulfilling a previous commitment by investors. The whole investment process takes over 3 months and investors are cutting cheques for older deals. The investments would further decline in May and we may also see some investors going back on their deals,” said Natarajan.