New Delhi, July 9 -- Venture capital deals at the Series A and Series B stages are seeing a slowdown while funding activity at the seed and growth stages is rising, investors said at a discussion during VCCircle's 'The Pitch' in Bengaluru.
In a discussion hosted by VCCircle with executives from venture capital firms and family offices to understand the 'Pulse of the Market', many investors noted a shift in deal activity towards more growth or late-stage deals and seed rounds, with fewer deals in the Series A or Series B stages. Some executives pointed that the shift was a result of fewer companies managing to break-out with strong metrics in these funding stages.
There is a "barbell" representation of the deal flow, with increased seed and growth-stage activity as fewer companies emerge with stronger financial metrics, explained Rohil Bagga, vice president and advisor at Lightspeed India Partners. "The few that do then get priced up and then you have like the $50-100 million type rounds," he said during the discussion.
Now in its third year, The Pitch's Bengaluru chapter, held late last month, featured 56 curated startups delivering elevator pitches to a panel of 26 VC investors.
V3 Ventures partner Abhiram Bhalerao and AUM Ventures founding partner Chetan Mehta concurred with the assessment. Bhalerao said that fewer companies were meeting the benchmark of getting funded at Series A and B stages, while consumer companies in the pre-seed to seed stage have higher deal activity.
"Investors at the Series A stage are looking for more traction and data points before closing (the deal)," Mehta added.
Java Capital founding partner Vinod Shankar noted that sectors such as defence technologies were seeing "significant" activity, pointing to drone maker Raphe mPhibr's $100 million funding round led by General Catalyst last month, the largest deal in the space in India. On the other hand, categories like consumer and SaaS are "not attracting a lot of capital, both at the bottom, at the top and the middle," he added.
Shankar, however, said Series A investors have become "way too risk averse", urging them to invest more money.
For investment in the deep-tech space, Sunil Cavale, principal at Speciale Invest, said Series A investors should perhaps look at areas like deep science, deep-tech, defence and biotechnology with a "different lens" as compared to other sectors as the gestation period in these sectors was longer.
But he added: "It doesn't change the fact that if you raised a bigger seed round, you need to show progress that is commensurate with that."
Published by HT Digital Content Services with permission from VC Circle.