Private equity funding in Indian start-ups declines by 25 pc

According to Goldman Sachs, the private equity funding in Indian start-ups has declined witnessing a dip of 25 percent YoY (year-on-year), falling from $2.5 billion in 2015 to $1.9 billion in 2016.

The report states that even though the total number of deals has increased by 52 percent year-on-year, but the average deal size has declined. It has now almost halved, amounting to only a meager $4.3 million. This corroborates the recent slowdown in the growth of Indian start-ups.

According to the report, Indian e-commerce received healthy capital inflows of over $8.4 billion in 2015 compared to $6 billion in 2014 but the capital flows into start-ups also started ebbing away after peaking to $4 billion by the end of 2015. The slowdown in private equity cash flows, in turn, has impacted Series B and C rounds of funding (i.e the growth and expansion stage) for Indian start-ups. The number of deals across Series A, B and C rounds dwindled at 73 this year as compared to 94 in 2015.

It has thus forced companies to take drastic measures to prevent them from shutting shop. They have resorted to lowering cash burn rates and restructure operations to focus on profitability.

Indian e-commerce scene

The e-commerce market in the Asia-Pacific region has seen unprecedented growth since 2014. Globally the e-commerce market is expected to grow by 20 percent primarily driven by China and India in the next three years.

According to the report, by 2020, Indian e-commerce industry is expected to account for 3 percent of total retail. Further, orders per million are expected to more than double from five million in 2013 to 12 million by the end of 2016.

Flipkart and Amazon are currently boxing for the top e-commerce spot in India. On one side, Jeff Bezos has recently committed to investing another $3 billion into the Indian arm of operations. While on the other hand, Flipkart is taking serious devaluation blows, trying to find its footing to fight the US e-commerce player.

The company has very recently structured its returns policy and started charging sellers a shipping fee and a collection fee for every product returned online. It has also forayed into courier services with its logistics arm Ekart called — Ekart Couriers.