There are indications that investors are now cautious about putting their money in new ventures.
With insufficient capital available, startups are going hungry. Only 8.3 per cent of them are successful in getting funding, said Thillai Rajan, Professor, Department of Management Studies, Indian Institute of Technology- Madras, releasing the India Venture Capital and Private Equity Report 2016, titled ‘Inspiration and Momentum for the Gladiators’ at TiECON 2016.
“Odds of success for getting funded continue to be low. In our estimate, for every 875 startups that get founded, only one is able to successfully raise 4 or more rounds of funding,” Mr.Rajan said.
Out of the total start-ups that get founded, about 6 per cent take part in an accelerator or incubation programme. A total of 75 of the 875 are able to get first round of funding, only 15 get second round of funding and 5 are able to secure the third round of funding.
Industry experts say that investors are getting more cautious when it comes to putting their money in startups and picking up stakes.
According to Prof. Thillai Rajan, who co-authored this study, investments in startups during 2005 to 2015 are estimated to be around Rs. 1, 11,700 crore. The annual growth rate in investment flow was 42 per cent and over 10,000 start-ups have received funding.
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