PE, VC deals slump in H1 2016 as investor caution spreads

If you are a budding entrepreneur hoping to start a business, be warned; you could find it extremely hard to get someone to fund your dreams.

Not only did the April-June quarter see angel and seed funding registering the sharpest decline in the past 12 months, deal activity across the private and public equity and venture capital segments has been sluggish in the first six months of 2016 as investors look for sustainable business models.

Figures for the first half (H1) of 2016, compiled by VCCEdge, the data research platform of News Corp VCCircle, show that both the volume and value of private equity (PE) and venture capital (VC) deals fell from a year earlier. The number of PE deals slumped 43% from a year earlier to 60 between January and June 2016 while VC transactions dropped by a third.

The sense of gloom becomes more evident if one looks at the sharp fall in the ticket size. While H1 of 2015 saw 25 deals valued at $100 million and above, the comparative figure for this year is 14 deals. Interestingly, the number of deals with undisclosed valued more than doubled to 236 from 109.

Vivek Gupta, partner, mergers and acquisitions, BMR Advisors, said deals have markedly come down in the e-commerce segment. Sanjeev Krishan, transaction services and PE leader at PricewaterhouseCoopers India, concurred with Gupta. But he said that wherever technology is an enabler, deals are still happening. “The startup ecosystem is not going anywhere,” he added.

The greater difficulty in getting initial-stage funding is evident also by the fact that, while in the first half of 2015 half the VC deals were Series A ones, this year the proportion has fallen to just over a third. In fact, a VCCircle report in February had noted that Series A funding had declined to 15-month lows.

A further perusal of the data shows that Karnataka pipped Maharashtra to the top spot this year in terms of deal volume. Delhi, Haryana and Uttar Pradesh were the other states in the top five. 

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