(MENAFN- KNN India) Forget the success story of Flipchart and Ola. The valuations of even early-stage start-ups have doubled or tripled from a year ago, as venture capital (VC) firms are jostling for a piece of the cake.
VC firms, which mostly follow the Angel Funds and finance more mature start-ups, have now shifted to early-stage deals, pushing out angel investors in many transactions and pumping up valuations of the green horns, many of which don't even have a proven revenue model, let alone clear profit potential.
Accel Partners, Sequoia Capital, Helion Ventures, Tiger Global, Saif Partners and IDG Ventures have been particularly active in early-stage deals. The six investment firms together did more than 40 early-stage start-up deals in 2014 and so far in 2015, compared with less than 10 in 2013, according to a research firm that provides data on start-ups.
The rapid pace at which valuations of early-stage companies have increased are fuelling concerns about excessive money floating around in the Indian start-up business. One of the key problems, according to analysts and investors, is that increasingly Indian start-ups are copying the business models of US companies, regardless of whether such models are scalable in India.
For instance, start-ups in food delivery and local services such as laundry have recently found favour with investors in the US. Sure enough, investors backed several Indian start-ups in these two sectors over the past few months.
Services marketplaces, which either connect customers with service providers such as electricians and plumbers or perform these tasks themselves, are also attracting VC funds. At least 10 such start-ups, including UrbanClap, Taskbob and LocalOye, have been funded by investors over the past six months.
While raising money is being seen as a sign of success, just by itself, the flip side is if investors pull back, many of the recently funded start-ups may struggle to raise money. (KNN/DB)
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