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Angel investment networks’ risk appetite reduces, funding slow in 2017: Innoven Capital

Both volume and value of deals have dipped significantly with investment values shrinking 63% in Q1FY18 compared to last year according to the India Angel Report 2017 by Innoven Capital.

, ET Bureau|
Dec 12, 2017, 08.15 PM IST
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Angel investments in the B2B sector have risen to form 40% of the entire investment pie at the early stage, according to the report.
MUMBAI: Tax complications and cautious optimism across growth stages in the venture capital ecosystem have made a dent on investment sentiment even across early stage angel investments. Both volume and value of deals have dipped significantly with investment values shrinking 63% in Q1FY18 compared to last year according to the India Angel Report 2017 by Innoven Capital.

However one of India’s largest and most active venture debt firms believes angel investors and networks are no longer confident of putting money in pre-revenue startups, rather seeking more established models thus signalling a decreasing risk appetite at the stage.

“Risk appetite has come down and discipline in terms of seeking business metrics as key parameters to make more investments are themes that are playing out. But while risk appetite is definitely paling, I don’t believe it is as much a funding winter yet,” maintains Ashish Sharma, CEO of Innoven Capital India.

That would also explain angel investors’ need to seek out more opportunities in the B2B space which are more cost efficient and lower mortality rates resulting in a spurt in investments in the sector rising 25%.

“B2C businesses have high mortality rates since they need to burn a lot more cash than B2B businesses. The key issue in B2C is to acquire customers which is an expensive process. B2C businesses then have to be very differentiated and the differentiation needs to be very strong,” said Sharma explaining why the exuberance over B2C has mellowed down.

“On the B2B side, it doesn’t take too much money to build and scale and costs are much lower. As the risk appetite has reduced a bit, angel investors feel that mortality rates in B2B will be lower and the ability to differentiate is a bit easier,” Sharma added.

Angel investments in the B2B sector have risen to form 40% of the entire investment pie at the early stage, according to the report.

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