Private equity firms are increasingly investing in startups, the territory that was almost exclusively occupied by venture capital funds and angel investors. Over half of PE investments in the quarter ended March 2015 was in this space, according to a report by Venture Intelligence.
55 percent of private equity deals in the quarter were in the venture capital segment. The total private equity investment in companies in the last quarter was $2.6 billion — 20 percent higher than what was invested last year in the same time period. Most of such investments were for less than $20 million in companies that are less than a decade old.
The largest e-commerce deal in the quarter was $100 million fourth round raised by ShopClues.com led by Tiger Global, which is also a key investor in sector leader Flipkart. "Now that the E-Commerce model is well established, other hedge funds are joining the bandwagon. This is driving local VC firms to do even smaller ticket deals," said Arun Natarajan, Managing Director, Venture Intelligence, in an email to HuffPost.
PE firms' involvement in venture capital deals is good news for startups for it expands their funding base. Such investments this quarter include Culture Machine ($18 million round led by Tiger Global), food ordering app Tinyowl ($16.25 million led by Matrix Partners India) and QSR chain Faasos ($16 million round led by Lightbox).
PE firms also invested in their usual mix of late-stage companies in various sectors, with IT and ITES companies accounting for 32 percent of the value pie. The sector got $836 million across 71 deals. Next in line were banking, financial services and insurance firms which received $816 million in 12 deals, among which Bandhan Financial Services topped with $260 million commitment from IFC.
Listed companies that attracted PE investments were Magma Fincorp (INR 500 crore or about $80 million from India Value Fund, Leapfrog and KKR) and M&M Financial (about $42 million from Temasek).