A majority of venture capital funds believe that the seed stage of funding for startups will see maximum activity during the year while the average deal size will be between $1 million and $5 million, a survey says. According to a survey by News Corp-owned VCCircle Network, the year will not be good for startups looking to raise funds in Series B, C and D as venture capital investors believe that valuations for these rounds will drop. Also Read - BYJU's Early Learn app takes kindergarten classes online using Disney characters and computer-vision frameworkAlso Read - Oppo signs MoU with Telangana to help startups grow
“Nearly 70% of the VCs believe that the seed stage will see the most activity in the current year and 77% are of the view that the average deal size will be between $1 million and $5 million,” the survey noted.
Only 23% of those who participated in the survey showed interest in investing in the e-commerce space while 46% indicated their interest in investing in startups in the consumer service and product space.
“The survey has predicted more challenges for startups in 2016. While mid-stage venture funding deals had hit a speed bump a few months ago, earlystage funding had remained robust, keeping hopes alive for startups looking for initial financing support,” VCCircle Network founder Sahad PV said. “However, if the first month of 2016 is anything to go by, even angel and seedstage investors seem to have tightened their purse strings.”
The survey further said about 62% of venture capital and private equity investors believe exit valuations will come down or remain flat this year. Some 46% of venture capital funds believe that the focus for Indian startups during the year will be ‘increased focus on profitability’.
“About 31% think it will be ‘mergers and acquisitions and consolidation’ while 23% predict it will be shutdowns, job cuts and scaling down of operations,” the report said.
The survey was carried out among 21 firms over a span of eight weeks (January-February 2016).