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US hedge fund Tiger Global and Japanese investment giant SoftBank have trimmed their investments in Indian start-ups by over a third — from $3.8 billion in the second half of 2021 to a mere $1.08 billion in H1 2022, according to data from Venture Intelligence.
While SoftBank’s investments in India dropped from $1.9 billion in H2 2021 by more than a fifth to only $0.33 billion in H1 2022, that of Tiger Global fell from $1.92 to $0.74 billion in the same period.
Private equity (PE) fund trackers point out that this year most of the deals that Tiger Global has invested in are in the early stage (up to series D), and only a few are in the series E and above.
Many start-up founders, too, admit the rush of PE investments has slowed down, and that with the focus now on preserving cash, controlling costs and moving faster towards profitability, new fund raises with large ticket sizes are becoming hard to come by.
Tiger Global and SoftBank, once the darlings of Indian startups, helping them raise funds and hit better valuations, have been going through global headwinds.
Tiger Global, which handles $75 billion through its PE and public funds, is having a bad year, with losses ballooning to 52 per cent in May due to the sell-off in tech and growth stocks in the US.
Known as a “unicorn hunter”, the fund invests in tech companies in the internet, financial and software sectors, amongst others.
SoftBank announced in May that it had incurred losses to the tune of $13.2 billion in the last fiscal due to the government crackdown on Chinese companies where it has large investments.
The fear of recession is also making investors wary of staying in companies with bloated valuations.
In fact, CEO Masayoshi Son has stated that SoftBank will cut back on its investments.
In H2 2021, the two funds accounted for 20 per cent of the investments made in India by the top 17 PE players.
But in H1 2022, their share has fallen by half — to 10 per cent. Again, in H2 2021 Tiger and SoftBank were at number 3 and 4 amongst the top PE funds, based on their investments in terms of value.
But in H1 2022, SoftBank was relegated to number 17, while Tiger Global was at number 4.
Of course, there has also been an overall slowdown in the money that VC/PE funds are willing to invest in Indian companies.
In H1 2021 the top 17 funds invested $18.5 billion, but that number has fallen to $10.08 billion in the first half of this year.
But other funds with a substantial stake in start-ups have stepped up.
CapitalG, which is part of Alphabet, has hiked its investment seven-fold — from $79 million in H2 2021 to $769 million — in companies like Cardekho and Practo, amongst others.
Alpha Wave Global, which is a big investor in the start-up space and in companies such as Mensa, Dream 11, Cars 24, Chaayos, Dailyhunt, Cred, Delhivery, Ola, and Ola Electric, has also increased its exposure in India.
Its investments have shot up from $516 million in H2CY21 to $718 million in the first half this year.
An interesting development in the space is the advent of domestic family businesses and government-supported funding vehicles.
For instance, the government’s National Investment and Infrastructure Fund participated in the recent fund raise of $128 million of electric vehicle (EV) company, Ather Energy.
And PremjIinvest, a PE fund owned by Azim Premji, has invested $402 million in H1 2022 (compared to only $185 million in H2 2021) in various start-ups, including First Cry, upGrad, Dailyhunt, Absentia VR and Shubham Housing, among others.
The other big players which have substantially increased their exposure in India in the first half of the year are sovereign funds like Qatar Investment Authority, ADIA, and CPPIB.
