2017 bodes ill for startup ecosystem; deal value and number declined significant in Q1

2017 isn’t starting on a good note for the domestic startup ecosystem with the cumulative deal value for Q1 declining by 46% q-o-q at a time when the industry saw a clutch of high value deals and big funding announcements. As a fallout of the slowdown in funding deals, there is a spurt in consolidation activity with the M&A deals jumping by 75% q-o-q. Some of the major M&A deals are the acquisition of Citrus Payments Solutions for $130mn, One Mobikwik for $41mn, ZipDial Mobile Solutions for $31mn, and Local Cube Commerce for $16mn.

Further into the analysis, while the angel and seed investments fell both in volume and value terms with deal volumes reduced to half, Series A funding also declined by 65% y-o-y in deal value. Investors showed more appetite for mature startups with Series B funding value improving by 22% in Q1 compared to the same period last year, despite deal numbers being lower by 16%.

Gaurav Roy, Business Head of News Corp VCCCircle, said that “A rise in Series-B funding even as seed and Series-A funding trends show a decline reflects investor cautiousness in early and mid-stage funding and the increasing focus on market-readiness for funding. The relief however is that M&A deals have picked up momentum post-2015 coinciding with the drop-in funding activity in the startup space, turning into an exit route for some promoters and a major source of funding for others. Enterprises which can work on a combination of strong revenue model and continuously updated technological knowhow which ensures a great consumer experience will continue to attract investors”.