Venture Capitalists moving focus to South

Chennai: Venture capitalists turn their focus South with the region garnering maximum share of funding in 2013. With a number of young guns joining the entrepreneur bandwagon, South India has accounted for 41 per cent of the overall VC investment activity during last year. 

Companies based in South India accounted for 41 per cent of all the VC investments and (55 per cent by value) during 2013 followed by West garnering 29 per cent of the pie and North accounting for 24 per cent of the investments.

South Indian cities including Bengaluru, Chennai and Hyderabad together attracted funding to the tune of $355 million for 78 companies.

Though a tad lower going by their previous benchmarks, venture capital firms invested about $805 million over 206 deals in India during the twelve months ended December 2013, according to analysis by Venture Intelligence, a research service focused on private company financials, transactions and valuations.

This was about 18 per cent lower compared to 2012 which had witnessed 252 transactions worth $898 million.

“This dip is a kind of indication that VCs wanted to go in for more safer kind of investment rather than riskier ones, given the current economic condition,” said Arun Natarajan, chief executive officer of Venture Intelligence.

“People seem to be banking on the follow-on funding rather than identifying new companies and this is the reason for the shift in the stage-wise funding,” he added.

Early stage investments accounted for 68 per cent of all VC investment activity (44 per cent in value terms) in 2013, a decline from the 83 per cent during 2012.

However, sector-wise, Information Technology and IT-Enabled Services (IT and ITES) ruled the roost with 130 investments worth about $404 million, garnering a cool 63 per cent of total VC investments for the year.

Healthcare and life sciences emerged as the second favourite attracting 27 investments worth $181 million followed by agri-business and food and beverages with seven investments ($20 million) and six investments ($30 million), respectively.

Restaurant chain Barbeque Nation (from CX Partners) and online taxi booking service Olacabs (from Matrix Partners India and existing investor Tiger Global), garnered the largest VC investments of 2013 at $20 million.