Indian Internet companies have caught up on the lost fund flow last year and have so far received investment of worth $7.4 billion, according to an ET report. Investment in the companies peaked in 2015 when they received $7.6 billion before dropping to $4.4 billion last year.
Of the total investment this year, about $6.9 billion of the inflows have gone into the series B round and higher growth-stage deals. The figures suggest that investors are largely backing startups which have strong metrics to show. It also shows that early-stage startups are still struggling to raise investment.
Investors’ demand list includes sharper margin constructs, lucrative market opportunities and mature entrepreneurs.
Besides, venture capitalist have also changed their approach from mere testing of an innovative idea to measuring for actual change in consumer behaviour in favour of it.
“Earlier, we used to get carried away by an idea presented to us but we have realised that it was never about the idea, it’s about the problem,“ said Karthik Reddy, Managing Partner at Blume Ventures, talking to ET.
He added that market opportunity and potential market size of a business have become key filters for investors. The focus now is on what problem area you are tackling, which is then directly related to the market size and opportunity. Market opportunity has become top-of-the-stack for VCs because that drives whether even a sub-segment of something can make a big enough company.
Questions regarding building the right margin constructs are being asked much earlier in the investment cycle, at the series-A fundraising stage. Variables such as customer acquisition costs and predictability for customer costs and acquisition are on top of the investors’ checklist.
Investors, too, have realigned their strategies, realising that seeking out only potential multi-billion-dollar companies may not be sustainable. Instead, they are taking cognizance of investment opportunities in companies that involve tremendous execution and heavy offline work.