In the first six months of 2016, India saw the third highest tech startup exits, according to US startup database CB Insights. The US led the list with 857 M&A/IPOs in the first six months of 2016, followed by the UK with 135. Indian startups witnessed 86 M&As, down from 96 in the second half of 2015. China, with just 15 M&As, fell to eleventh position from seventh in the second half of 2015.
The number of exits in the June quarter, at 820, was a 6 per cent increase over the March quarter. After a lull, the second quarter saw some traction with 16 tech IPOs. This comes after a report stating there were over 1,590 exits globally in the first half of 2016, a 17 per cent decline from the same period last year.
As per reports by The Times of India, Venkatesh Peddi, executive director at VC firm IDG Ventures, feels growth of the exits is a healthy sign of the system maturing. “ While this data only indicates the number of exits, the size of the exits still remains low. But it’s just a matter of time and as the market evolves, we should be witnessing bigger transactions. We are witnessing it on the ground as well. When I started a few years ago, companies weren’t looking at acquisitions as a medium to grow but now it’s changing,” he said.
Karthik Reddy, managing partner at VC firm Blume Ventures, said the higher number of acquisitions is good for the ecosystem, but cautioned that the ventures being acquired are not necessarily quality startups. “We are weeding out capital-inefficient businesses or inefficient team/entrepreneurs sooner than later,” he said.
But Reddy added that the value of the acquisitions tends to be low, and will continue to be so for the next 12 months, due to the weak balance sheets of the bigger startups that are making the acquisitions.
Surprisingly, 72 per cent of companies that exited didn’t raise VC or PE money prior to exit. Given the large number of consumer internet companies, every country in the top 5 had exits in the space. In India, 28 per cent of the overall exits were of mobile ventures, the highest among the top 5 countries.