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'Over two times increase in VC funding for Startups in India'
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SME Times News Bureau | 27 Jan, 2016
Start-up companies saw a 2.3 times increase in number of private equity
(PE) or venture capital (VC) funding deals in 2015, which indicated a
significant broadening of the sector beyond e-tailing, a recent
Jefferies research note said in New Delhi.
"There was a 2.3x increase in
number of PE/VC funding deals in 2015 indicating a significant
broadening of the sector beyond e-tailing," the research note said.
The report said fund raising from PE/VCs aggregated $5.7 billion in 2015 compared to $4.1 billion in 2014.
"While
the December quarter was relatively muted with less than $1 billion of
funds raised, we note that number of deals (of $5 million and above)
still doubled year-on-year from 12 to 24."
According to the
report, two key trends emerged in 2015 -- unlike in 2014 when e-tailing
companies accounted for over 70 percent of money raised, 2015 saw
significant diversification with many non-e-tailing companies raising
more than $100 million of funding each.
Also, while the value of
funds raised increased by 40 percent year-on-year, the number of deals
increased 2.3 times from 49 to 112 indicating a significant increase in
the breadth of companies.
The Indian government announced the
Start-Up India Action Plan on January 16, where it gave an income tax
holiday for three years and exemption from capital gains levies on
venture capital investments to the start-ups.
"While there are
some positive measures, the definition of start-ups to qualify for many
of the schemes could be a limiting factor," the report stated.
A
host of incentives were unveiled by Prime Minister Narendra Modi for
start-ups, which included self-certification and a three-year exemption
from inspections, an online portal and mobile app, an 80 percent cut in
the patent application fee and a single-point hub for hand-holding.
He
also announced a Rs.10,000 crore fund for new enterprises, equal
opportunity in government procurement, a Rs.500 crore credit guarantee
scheme and easier exit norms.
The Jefferies report pointed out
"the definition of startups to qualify for the government schemes
precludes start-ups with turnover of over Rs.250 million, which would
limit the benefits to better performing startups. Moreover, the
definition also requires that start-ups get certification from an
inter-ministerial board, which could prove onerous".
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