The Indian start-up ecosystem is booming, and venture capital firms, or VCs, represent one of its most important components. Venture capitalists are entrepreneurs and financial specialists who run venture capital firms. These funds are mostly focused on early-stage start-ups that have the potential to expand and grow into extremely successful enterprises.

According to statistics, even the most inventive business concepts with an exceptional team fail due to a lack of sufficient funding in the early stages of operation. When start-ups and small enterprises reach the growth stage, they will require a significant amount of money to continue developing successfully.

Previously, small firms and start-ups had no alternative except to seek finance from banks and other associated sources. Start-ups in India now have more stable financing sources owing to the emergence of angel investors and top venture capital firms.

KPMG's Remark on VC Investments

Recently, KPMG Ventures released a plus report which shows venture capital investments in India plummeted sequentially to $10.36 billion in October-December last year, from a record quarterly high of $15.39 billion in July-September. However, venture capital investment in India's second-best quarter on record happened between October and December.

A developing economy, stable government policies, and a burgeoning middle class have aroused the interest of Indian venture investors. Furthermore, shifting Chinese policy goals are likely to have resulted in increased investment in India, particularly in regions where the Chinese government is not a priority.

According to statistics, while certain industries in China have seen venture capital investment dry up in recent quarters due to regulatory reforms, other areas have continued to attract interest. According to the report, advanced manufacturing, electric vehicle production, renewable energy, green technology, healthcare, and biotech are among the companies that have remained popular.

In the fourth quarter of 2021, India remained a hotspot for venture capital investment in fintech, health-tech, B2B services, and direct-to-consumer (D2C) platforms.

In terms of unicorn company formation, India saw the development of over fifty new unicorn organisations, a significant increase over prior years. A unicorn company is a privately held start-up valued at $1 billion. It said, “the breadth of new unicorns in India highlights the growing breadth of India’s startup ecosystem and maturity of start-ups across a range of sectors.”

Exit activity in Asia was also solid in 2021, according to the report, with India's initial public offerings (IPOs) of online cosmetics company Nykaa and digital payments business Paytm. Nykaa's IPO in October raised $722 million, while Paytm's IPO in November raised $2.4 billion. The growing Indian stock market is likely to have maintained investor interest in venture capital, as investors have grown increasingly optimistic that their investments in the country would pay off well.

According to the report, the fourth quarter wrapped off a good year for the global venture capital market, with near-record highs in total venture capital investment, corporate venture capital investment, exits, and worldwide fundraising.

This year, global quarterly venture capital investment reached $150 billion for the second year in a row, achieving $171 billion across 8,710 deals in Q4'21, just marginally less than the prior benchmark of $180 billion across 9,953 deals in Q3'21.

It also highlighted that over nine $1 billion megadeals struck by US and Asian corporations generated well over $13.5 billion to the quarter's total global investment.

Furthermore, the Americas received $95.2 billion in venture capital investment in the fourth quarter of the 21st century, followed by Asia ($46.2 billion) and Europe ($28 billion). According to the KPMG quarterly VC report, corporate VC remained strong in Q4'21, reaching $81 billion, a modest decrease from the previous record of $90 billion in Q3'21. Meanwhile, corporate investment reached an all-time high in Q4'21, accounting for 29.4 percent of all VC deals worldwide.

According to Amarjeet Singh, Partner at KPMG India, India's venture capital ecosystem has improved in the previous two years, and the market is currently quite favourable. He said, “the stock markets have been booming. Investors have gained confidence about potential exits. All of these are driving VCs and LPs (Limited Partners) to put loads of money into India’s VC ecosystem -- and one well-positioned to continue as we head into 2022.”

New Vogue of Investment & Start-ups in 2022

According to the report, venture capital investment in Asia is projected to remain strong in the first quarter of 22. According to the report, ESG-aligned enterprises and venture capital investors are increasingly prioritising or targeting a broader range of ESG characteristics, and such investments are expected to grow as a result.

Following a record number of unicorn births in 2021, there is significant speculation that India's unicorn stable will expand even more in 2022, as quickly expanding firms across a wide variety of sectors seek larger funding. Venture capital investment is expected to remain strong until 2022, with investors focusing on less developed regions such as Africa and the Middle East. According to the study, fintech, B2B services, cyber-security, healthtech, and AI solutions across industries will remain attractive investment areas, although all sectors may see some consolidation as smaller enterprises seek growth or are acquired by larger, better-capitalized competitors.

The proportion of VC investments in India is increasing at an incredible rate. They have opened up new opportunities for Indian entrepreneurs and small businesses to develop, and the future appears promising.