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Foreign investments doubled to $16,728 million in 2017 on the back of friendly policies, tax relief and innovative products. 

Indian startups seem to have become a favoured investment avenue for foreign funds. According to media reports, the key reason for increasing foreign investments in Indian startups is the innovative product solutions emerging from them, India as a venture skill hub and friendly policies by the government.

Media reports quoted Padmaja Ruparel, President, Indian Angel Network as saying that foreign venture capital (VC) and private equity (PE) funds are rising in India, especially from Japan, Europe and West Asia. She credited the improving quality of startup ventures, government’s startup-friendly policies and tax relief measures for the rising investments.

Venture Intelligence data shows foreign PE and VC firms’ investments in Indian startups, out of their global/Asia funds, has increased 96 per cent to $16,728 million in 2017 compared to $8,497 million in 2016. However, there is a decline in the number of deals which has come down by 16 per cent from 175 in 2016 to 148 in 2017. As regards foreign LP contribution, investment stood at $1889 million in 2017, down 16 per cent, compared to $2250 million in 2016. Global VC and PE investments, for the quarter ended March 2018, were led by North America, followed by Asia and Europe.

Investors are now foussing on quality of entrepreneurs and startups as borne out by the declining number of deals but increasing ticket size per startup.

Indian startups are evolving, as according to Sunil K Goyal, Founder & Chief Executive Officer, YourNest Venture Capital, even some years back most of the startups ideas were either rehash of existing solutions in the West or B2C focussing on convenience. However, now many IP-led startups in the B2B space are coming up with  solutions focussed on solving the needs of society by using technology.

Goyal calls it a transition to creating innovative hardware and software products. This shift has attracted global VC and PE players, he adds. Another factor could be the recent Flipkart-Walmart deal, which has the potential to build confidence in future investors and encourage more funds, as it has shown that exits that were always an issue, need not remain so. 

Further, the diverse geography and population of India makes it attractive to foreign funds as it offers the scope to test the innovations. In comparison, emerging startup hubs like Israel have to look to the US for testing the solution’s scalability.

An apt example is the healthcare startup Visit, recently funded by Twitter co-founder Biz Stone. It uses Artificial Intelligence-powered chatbot to diagnose patients by asking relevant questions. The solution was tested in Indian market and upon its success here, the startup is now looking to launch the solution in the US. For foreign investors, such innovative startups are attractive.

(Source: BusinessLine, media reports)

http://www.cfo-india.in/article/2018/05/23/indian-startups-see-spike-foreign-investments