Software, consumer items, fintech account for 63% of venture funding: study

The 2018 report has identified the factors associated with successful ventures in different stages of their lifecycle.

Three sectors — namely software and internet services, consumer products and services, and fintech and payments — account for 63 per cent of the companies nationally that received venture funding, according to a study by the Indian Institute of Technology, Madras (IIT-M).

The institute released its 10th annual report on Indian venture capital and private equity focusing on ‘The Success and Impact of Start-Ups’ during TiECON Chennai 2018, the annual entrepreneurship conference of TiE Chennai on Saturday.

The 2018 report has identified the factors associated with successful ventures in different stages of their lifecycle. This would help the entrepreneurs to better prepare their ventures for success and thus enhance the impact that can be achieved.

Editor and co-author of the publication since its inception in 2009, Prof Thillai Rajan, department of management studies, IIT Madras, and co-founder YNOS.IN, and associate at Harvard Kennedy School, Harvard University, said, “Start-ups have captured the imagination of many, namely, government, investors, students and entrepreneurs, because of the impact they have been able to create in different sectors and areas of policy importance.”

Rajan added that, however, to be able to create an impact, the start-ups have to be successful. Venture capital investment is dominant only in few of the sectors. Among those that receive venture funding, only a modest percentage has been able to get subsequent rounds of funding. And among those start-ups that get funded by venture capital, only about 20-25 per cent are able to provide an exit. The end game, or the exit strategy, has to be clear upfront, given the strong relationship between sector, type of exit, duration of investment and returns.

The study found that only a small proportion of the companies formed are successful in getting venture capital. A few sectors dominate the list of companies that get venture funding.

With inputs from FE

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