Venture capitalists (VCs) invested around $928 million (around Rs 3,700 crore) in 80 India-based firms during 2007 -- a 166 per cent increase over the $349 million invested in 36 deals in 2006 --, according to the latest quarterly India Venture Capital report published by Dow Jones VentureSource.
Of these deals, nearly 48 per cent were for Information Technology (IT) companies, as 38 rounds were completed, accounting for $384 million (around Rs 1,500 crore -- more than India's 2006 venture investment total).
The most popular recipients of venture capital in the IT industry were companies in the web-heavy "information services" sector, which accounted for 22 deals and nearly $141 million (around Rs 560 crore) in investment.
Among the deals in this area was the $10 million second round for Bangalore-based Four Interactive, an online provider of local information on food, events, lifestyle, shopping and more.
"Service-oriented companies in India -- both in the technology fields and the non-technology areas of hotels, taxis and similar services -- continue to attract investment and this is likely due to their low capital requirements as well as to the rapidly emerging nature of the broader Indian economy," said Jessica Canning, Director of Global Research for Dow Jones VentureSource.
"It takes relatively little money and little time for these kinds of companies to begin generating revenues and, because of this, web-related and consumer and business services companies accounted for more than half of all the venture capital deals done in India in 2007."
According to the data, the business, consumer and retail segments saw 30 deals completed in 2007 and more than $346 million invested -- a 92 per cent jump over the $180 million invested in 16 deals in the industry in 2006.
As said, the business/consumer service area accounted for the bulk of the interest in this industry, with 22 deals and $254 million invested.
India's healthcare industry, while still in its infancy, also saw increased investor interest in 2007 with seven completed deals and nearly $100 million invested, more than double the $41 million invested in the prior year.
"This is only the beginning for the venture capital market in India," said Canning.
"In 2007, 79 per cent of all deals in India were for seed and first rounds and a lot of these companies will continue raising venture capital as they progress toward profitability and liquidity. And because the majority of investment is going to early-stage companies, we aren't seeing ballooning deal sizes like those in the US and Europe where investors are focused more on later-stage companies."
