The report also highlighted that investors continue to show preference of backing more experienced founders.

Early stage funding more than doubled to Rs 6930 mn in 2019 InnoVen Capital report
Atom Fund Raising Friday, December 27, 2019 - 11:44

Early stage funding more than doubled to Rs 6,930 million in 2019 compared to Rs 3340 million in 2018. According to a report by InnoVen Capital, the surge in funding was driven by a 22% increase in number of deals and a 70% increase in deal size.

Bengaluru, NCR and Mumbai formed the core of the startup ecosystem with Bengaluru having a 37% share, NCR 29% and Mumbai 20%, close to 2018 levels.

The ‘Early Stage Investment Insights Report 2019’, focuses on early stage investment activity across angel and pre-series A stage and was developed by analyzing market information, along with a survey with 18 leading institutional early stage investors.

The report also highlighted that investors continue to show preference of backing more experienced founders, with proportion of founders with at least 5 years of experience going up from 55% in 2017 to 82% this year.

Consumer Internet, Enterprise Tech/AI, Fintech and EdTech emerged as the most active sectors for early stage investors.

However, the survey revealed that number of startups with at least one female co-founder went down in 2019 to 12% as against 17% in 2018.

As per the report, investors believe that this trend will continue but indicated that they would like to do more in Enterprise Tech & AI and FinTech in 2020.

The study found that almost 50% of early stage investors felt that the valuations in 2019 were on the higher side due to intense competition for quality deals. However, majority (56%) foresee some correction in the valuations in 2020.

The report revealed that investors are more open to funding startups in pre-revenue stage, which is reflected in the share of pre-revenue funded start-ups increasing to 17% this year from 12% in 2018. This trend is driven by concept stage ventures launched by second time entrepreneurs and experienced first-time operators.

Investors mentioned that when evaluating companies, they look for a clearly identified large addressable market, some product-market fit and scalability. 78% of the companies that failed to obtain funding from Institutional investors either had no product-market fit or were addressing a niche market opportunity. The survey also highlighted that investors have a preference for startups with more than one founder, with 89% of funded start-ups having two co-founders. The two most important qualities that investors look for in founders are vision and prior experience or background.

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