Investment momentum in startups has witnessed a rapid rise in the last five years and in 2015, over 600 companies got funded with more than $2 billion being deployed by PE and VC funds.
According to assurance, tax and advisory firm Grant Thornton, investment values increased at a compounded annual growth rate (CAGR) of more than 57 per cent between 2011 and 2015 while investment volumes increased at a CAGR of over 62 per cent.
"2015 witnessed the maximum traction in this space with over 600 companies getting funding; more than $2 billion being deployed by PE and VC funds," the report said.
Substantial interest was also generated in the logistics segment with $262 million investments largely driven by investments in e-commerce logistics players, the report said.
The report noted that the Indian startup ecosystem has evolved, being driven by factors such as growth in number of funds/angel investors, evolving technologies, smart phones and the social media penetration.
The top deals in 2015 include investment of $700 million in Flipkart by Sequoia Capital and Steadview Capital, $500 million in Snapdeal by Alibaba, Softbank & others, $1,100 million in Olacabs by a group of investors including Tiger Global, Softbank, DST Global etc.
Other fairly large transactions include investment in Quickr, Jabong, Ecomexpress, Grofers, Foodpanda, Shopclues, Pepperfry and Oyorooms who have received funding of more than $100 million.
Investors such as Accel Partners, Blume Ventures, Tiger Global, Kaalari Capital, SAIF Partners, Sequoia Capital, IDG Ventures, the Indian Angel and Mumbai Angel Network continue to dominate the market, the report said.
Moreover, M&A activity continued to rise in this space with Alibaba acquiring stake in Paytm, OlaCab's acquisition of TaxiForSure, Jasper's acquisition of Freecharge.com, Zomato's acquisition of IAC-Urbanspoon etc.
"Slight pessimism had started setting in the second half of 2015 with startups shutting down and retrenching employees. However, in 2016 we expect that new innovative startups will continue to attract investors' interest," Grant Thornton India Director Kinnari Gandhi said.
Gandhi further noted that in 2016, "there will be increased rationality in this ecosystem, funding may get tougher and focus will increase to fundamentals, justification around valuations and scalability."
There may be a fewer number of unicorns in the making as a result of this, he said adding that consolidation will be on the rise and valuations in this space may still be aggressive.