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Bengaluru stands tall with $2.6-billion venture capital

The Times of India:  January 23, 2015

Bengaluru: India's IT hub, Bengaluru, came in fifth in a list of cities globally that received the most venture capital in 2014, an indication of the growing vibrancy of its startup ecosystem.

San Francisco led the list with $13 billion of VC investments, followed by Beijing ($6.4 billion), New York ($5.7 billion), Palo Alto ($3.2 billion) and Bengaluru ($2.6 billion). The list has been put together by Crunchbase, a global startup ecosystem database.

Among countries, India received the third highest VC funding ($4.6 billion) after the US ($58.9 billion) and China ($8.9 billion).

Ravi Gururaj, chairman of the Nasscom Product Council, says India enjoyed record VC investments in the second half of 2014, and the wave shows no sign of slowing down. "This was kicked off by the historic election results which boosted investor confidence tremendously. Additionally, private equity investors worldwide, particularly those that missed out on the meteoric rise in Chinese startup valuations, flocked to high performing Indian consumer startups determined not to miss out on a fast ride on the India Startup Express."

Sanjeev Aggarwal, co-founder of Helion Venture Partners, says Bengaluru's lead position is because of its ability to attract tech talent. "The cycle kicked in with Infosys and Wipro, followed by global companies coming in large numbers. Engineers employed with companies like Google and Yahoo wanted to experiment with new ideas, and that has spawned a startup culture. Mobile apps and cloud have reduced entry barriers to build companies," he told TOI.

CrunchBase does not give a breakup of the investments in each city. In Bengaluru's case, a significant portion of the $2.6 billion would likely be on account of Flipkart's two rounds of funding that happened last year. The e-commerce company received an estimated $1.7 billion.

Parag Dhol, MD of Inventus Advisors India, believes Bengaluru's startup ecosystem is beginning to have a multiplier effect. "You have an ecosystem where companies have gone public, there are good product startups, and new-age entrepreneurs are turning into angels. In that sense, success begets success. Venture capitalists are looking at India with a fresh set of eyes," he adds.

Aggarwal notes that capital is going particularly to the leaders who are building companies in large under-served markets, and to companies like Flipkart, Snapdeal and Ola. "Investors are paying a leadership premium," he says.

Japanese internet giant Softbank invested $627 million in Snapdeal and $210 million in Ola Cabs last year.

Where bengaluru scores:

  • Bengaluru has an ability to attract tech talent.
  • Engineers who worked with Google and Yahoo wanted to try new ideas.
  • Mobile apps and cloud have reduced entry barriers.
  • Venture capitalists are looking at India with a fresh set of eyes.

Disclaimer: This information has been collected through secondary research and IBEF is not responsible for any errors in the same.

x IBEF : India Brand Equity Foundation