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Investor Interest Dwindles In E-Commerce, Valuations To Come Down Or Remain Flat : VCCircle Survey

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Amid Government’s aggressive push for investments in the Indian start up ecosystem, a VCCircle Network survey reveals that investor interest in the e-commerce start-ups is waning. In fresh findings published as part of the VCCircle PE-VC Outlook Survey 2016, “about 92 per cent of venture capital investors believe valuations for Series B, C and D rounds will drop”, stated the findings.

The survey, released as part of VCCircle India Limited Partners Summit 2016 has revealed that 62 per cent of venture capital and private equity investors “believe that exit valuations will come down or remain flat this year.”

The survey further concludes, that close to 62 per cent of the VC firms who participated in the survey believe the most relevant exit channel in the current year will be sale to strategic investors while the remaining 38 per cent believe it would be secondary sale to other VC or PE investors,” stated VCCircle.

The findings from the survey also revealed a hopeful aspect for start-ups in the first quarter of this year. It stated that the strong majority of those who participated in the survey believe more strategic investors will do deals this year. But it also pointed out that in general, investors are losing interest in the start-up ecosystem, especially for e-commerce start-ups.

It further indicated that private equity and venture capital investors believe that the trend will continue for the coming months and valuations of companies will decrees and investments from limited partners will not fetch high capital gains.

A reoccurring pattern brought out in the survey is that Indian start-ups will have to strive for productivity, as 31 per cent of VC firms believe that it can be achieved by mergers and acquisitions and consolidation. About 23 per cent hold the opinion that the start-ups will have to cut down on jobs and scale down their operations.

Irrespective of the overall waning outlook towards the ecommerce start-ups, the findings highlight the fact that seed stage funding will remain strong and active throughout this year. About 77 per cent of venture capitalists who participated in the survey added that “the average deal size will be between $1 million and $5 million.”

While interest declines in the ecommerce space, lot of investors are looking towards the consumer service and product space with optimism. About 46 per cent expressed their interest in investing in start-ups in the consumer service and product space, while only 23% still rooting for the e-commerce sector.


 

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