Venture Capital Investments Double 120 percent in the Second Quarter

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Aug. 22 – Venture-capital investment in India more than doubled by 120 percent in the second quarter of 2008, a Dow Jones report stated.

Venture firms invested US$237.6 million across 17 deals in the three months ended June 30, compared with US$108 million and 12 deals a year earlier, according to data from VentureSource, a unit of Deal Journal publisher Dow Jones. Since the first quarter of 2007, when venture capitalists flooded India with US$436 million across 41 deals, investment had held steady at a quarterly average of roughly US$118 million through the first quarter of 2008.

The biggest contributor to this year’s second-quarter jump is the US$70 million, second-round investment in Laqshya Media, a Mumbai provider of out-of-home media advertising services, the Wall Street Journal reported.

Even with the second-quarter pop, investment is down through the first six months of the year, in part because of the strength of last year’s first quarter. Investors have put US$360.5 million in 35 deals in the first half, down from US$544 million and 46 deals a year earlier. By comparison, venture firms invested US$2.15 billion in mainland China companies in the first six months of 2008.

Like China, venture firms are funding more later-stage Indian companies instead of buying into new start-up business: 74 percent of first-half deals in India involved companies that were profitable or were shipping a product, while 23 percent dealt with start-up companies still in product development and just one company was newly formed.

By industry, the advertising and marketing space drew the most capital, with US$89 million directed into five companies. Other industries receiving at least US$20 million included food and drug retailers, automobiles, shopping and heavy construction/infrastructure.