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India Venture Capital Industry expected to grow while developed markets shrink

New Delhi, July 15, 2010: 2010 Global Venture Capital Survey marks the sixth anniversary of this survey. Sponsored by Deloitte Touche Tohmatsu’s (DTT) Global Technology, Media & Telecommunications (TMT) industry group, the Survey was conducted in association with venture capital associations in US, Canada, UK, France, Germany, China, India, Brazil and Israel. This year, the focus of the survey was to determine venture capitalists’ perception of the investment conditions in their home country and their outlook for the future.

The 2010 Global Venture Capital survey, which measured the opinions of more than 500 venture capitalists worldwide, also examined the factors which are contributing to each country’s outlook. Respondents felt that improving entrepreneurial environment and growing market in India create a favourable climate for venture capital in India.

Venture capitalists in India expect their ecosystem to expand. This sentiment was echoed in other emerging markets like China and Brazil in comparison to the developed markets, notably the United States, where the industry is expected to contract. The vast majority of survey respondents in India expect the number of venture firms to increase and also anticipate a significant increase in amounts available for investment, in contrast to 62% of the global respondents expecting the venture firms and amounts available for investment to reduce.

Talking about the findings, Rajiv Sundar, Senior Director, Deloitte in India said, “The current venture capital market reflects signs of strength and confidence despite recent challenges. There is renewed optimism especially for sectors which are driven by strong consumer demand with India’s growth expectancy and growing domestic consumer class being key drivers. 2010 has already seen significant increase in deal activity but as before, expectation on valuations may be challenging to manage.

There is an optimistic belief that quantity and quality of deal flow will improve significantly in India, with most predicting an improving or stable environment for valuations. Most respondents also believe that limited partners will be highly inclined to invest in India venture capital funds in the next five years.

Traditionally strong markets like the U.S. and Europe will continue to be important hubs despite consolidation in the number of venture firms,” said Mark Jensen, Deloitte in USA, Managing Partner for National Venture Capital Services. “However, the stage has now been set for emerging markets like China, India and Brazil to rise as drivers of innovation as they are increasingly becoming more competitive with the traditional markets.

The Asian markets, in particular, are abundant in entrepreneurial spirit, energy and a dedication from both the private and public sectors to push the economic growth pendulum as far as possible,” said Trevor Loy, General Partner of Flywheel Ventures. "The continued rapid growth of emerging markets is also creating a new source of customer revenue, investment capital, job creation, and shareholder liquidity for U.S. based technology start-ups, particularly those leveraging America's deep R&D resources to address critical infrastructure needs in energy, water, materials, and communications."

Majority of respondents feel that investment levels in cleantech, healthcare services, biopharmaceuticals, medical devices and equipments and consumer business will increase. There were mixed reactions for telecom, software, electronics and new media, as respondents were divided between investment levels remaining same and for levels increasing.

Notes:
This press release has been given by Deloitte Touche Tohmatsu India Private Limited, a company established under the Indian Companies Act 1956.

DTTIPL is a member firm of Deloitte Touche Tohmatsu, a Swiss Verein whose member firms are legally separate and independent entity. Please see www.deloitte.com/about for a detailed description of the legal structure of Deloitte Touche Tohmatsu and its member firms.

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