Investors continue to be ‘cautious’ on startup investments in Q3, e-commerce still a favorite

Investors are still treading a ‘cautious’ line as far as startups are concerned as investments went down to $1.363 billion in the third quarter of 2016, according to start-up tracker Xeler8. Also, following in the trend of first two quarters, deal activity too registered a five percent decline in Q3.

According to a recently published report by Xeler8, a total of 288 start-ups cumulatively raised $1.363 billion in the third quarter compared to $1.5 billion (second quarter) and $1.7 billion in the first quarter.

Only 71 deals were penned down in September as compared to 101 in August and 123 in July, totaling 295.

"It has been a slippery slope for start-ups in this quarter. However, the investment amount took interesting curves with $465 million in July, $693 million in August to only $204 million in September," the report said.

The top funding deals include Hike ($175 million), Oyo Rooms ($123 million) and BookMyShow ($81.6 million), it said adding that top investors in the quarter included Sequoia Capital (13 deals), Accel Partners (11) and IAN and Kunal Shah (7 each).

Further, there was a 21 percent decrease in early-stage deals in Q3 as compared to Q2. On the other hand, late stage deals have seen a 50 percent increase as compared to Q2, the report said.

Delhi-NCR once again held the top front with 98 deals followed by Bengaluru with 80 deals.

Not so surprisingly, e-commerce is still a favorite with investors as 46 start-ups from the sector got funded in Q3, 2016, followed by 26 SaaS-based startups. Healthcare and fintech also bagged 22 deals each.

"The end of third quarter mirrors new hopes and aspirations in the start-up ecosystem. Although, the investment has gone down, more number of investors have turned up to place their bets. New avenues have opened for industry veterans," the report said.

But despite the deal scarcity, the quarter noted down significant rise in M&As marking the consolidation streak. The quarter saw an exponential increase in M&A activity with 65 M&A deals, compared to the previous quarters at 48 in preceding quarter and 40 deals in the first quarter of this year.

There were a total of 10 inbound M&As by major companies with TupleJump’s acquisition by Apple being the biggest.