Feb 18, 2022
Venture Capitalist in India:Enabling Revolutionary Change
The money given by investors to startup companies and small enterprises with the potential for long-term growth is known as Venture capital and is often regarded as 'good capital.' Venture Capital is helping startups create wealth, wherein the valuations not only benefit founders or investors but all stakeholders, including employees. In turn, Startups have been encouraging the spending and consumption cycles. Venture capital has enabled a revolutionary change to create a new world. For venture capital, industrial transformation presents the biggest investment opportunity of the twenty-first century.
The American Model: Relying on High-Tech
The concept of venture capital (VC) was mostly created in America. The United States has adopted this "long tail" distribution of pay-offs with greater impact than any other country globally. Despite threats to its dominance, Silicon Valley continues to be the largest VC-based entrepreneurial hub in the world. According to conventional wisdom, the establishment of the Boston-based American Research and Development Corporation (ARD) in 1946 marks the beginning of the venture capital sector in America. In an effort to systematise long-tail investing in startups in a manner comparable to the contemporary venture capital business, ARD was one of the first investment firms to make the endeavour. The early development of several significant financial institutions and precedents is illustrated in history, which provides an important context for the future of the sector. It also aids in illuminating why venture capital is strongly associated with America. To finance fledgling businesses, venture capital is largely focused on the high-venture capital industry in india, tech industry, where capital efficiency is at its best and the growth potential is at its biggest.
Despite a continued fall in the number of acquisitions,venture capital investments in the United States are on course to reach their highest level since 2000. Venture capital firms made investments totalling $61.4 billion in 5,948 closed acquisitions in the first two quarters of 2022. According to data from Pitchbook-NVCA Venture Monitor, the average deal size grew to $10.3 million this year, a decade-high, as new businesses tend to remain private for a longer period and attract significant late-stage fundraising rounds. In 2022, the median deal size for later-stage VC rounds was $11 million, compared to $1 million for angel/seed investments and $6 million for early-stage VC deals.
Industrial Revolution 4.0: Global trends
Global capitalism's success has helped billions of people escape abject poverty and sparked amazing technical developments. This development has not come without a price, though. Numerous concerns, such as climate change and a lack of economic inclusion, have been brought about by the abundant energy from fossil fuels, global supply chains, and middle-class lifestyles supported by innovations like on-demand internet commerce. By going back to its roots in industrial change, venture capital plays a significant role in addressing the economic, environmental, social, and technical challenges we currently confront. The $3.7 trillion IT business, a relatively modest portion of the global economy, has seen more incremental change recently than the decades-old venture capital that helped technological power revolutions. But a gradual change is occurring: the Fourth Industrial Revolution, driven by the convergence of digital, biological, and physical advances, is upending many global businesses and creating opportunities worth tens of trillions of dollars.
Venture capital has been reshaping major global industries while creating enormous economic opportunities by investing in artificial intelligence (AI), massive cloud computing, robotics, and molecular and biological science application. This can help offset and possibly reverse the excesses of capitalism. Compared to most venture investing's existing focus, this new technology investment opportunity is at least five to ten times greater.
The Real Revolutionaries
According to energy journalist, Robert Bryce's estimation and an updated estimate of the world's GDP of over $90 trillion provided by the World Bank World Development Indicators, the current worth of the global energy market is more than $7 trillion. A third of this is made up of electricity. It is statistically impossible for solar, wind, and hydropower to provide all of the world's energy needs, let alone the transition to cleaner electric vehicles and the next few billion people. Undoubtedly, the world requires a tremendous quantity of renewable energy, but the US only produces 9% of its electricity from wind and solar, according to the Energy Information Agency. In the last 60 years, the environmental effects of burning coal and natural gas to produce power have been orders of magnitude greater than those of clean energy. Advanced technology can make it possible to produce energy that is zero-carbon, secure, and extremely resistant to proliferation without requiring massive, multi-year, multi-billion dollar construction projects. This innovative approach to energy generation can empower the entire planet when combined with a greater reliance on renewable sources.
Non-communicable diseases (NCDs), such as diabetes and cardiovascular disease, are a significant burden on low- and middle-income nations and infectious diseases (LMIC). Four out of every five patients with NCDs presently reside in LMIC, a region that has historically been linked with ageing populations in high-income nations. The idea that low- and high-income nations confront different illness issues is becoming more outdated; therefore, advancements for LMIC, like affordable diabetic medications, may also substantially influence high-income nations. Global health is a prime illustration of how economic and social benefits may coexist, and impact investing is rapidly gaining popularity. Last but not least, venture capital assists in drawing huge firms' attention to this mainly untapped market niche.
Biotechnology comes in second with 17.3% of US VC funding, followed by investments in software at 36.2%. With 9.5%, media and entertainment complete the top three. Information Technology services, medical supplies and equipment, and industrial energy are additional booming and innovative industries. Investment levels are lower in telecommunications, consumer goods, and financial services. It should be no surprise that a large portion of venture capital (VC) funding goes to software companies, with the Fourth Industrial Revolution ushering in an increase in technology use. To boost productivity and raise quality in the industrial sector, advanced robotics have established themselves as a mainstay on the factory floor for the past few decades. Beyond auto assembly lines, robot use is now swiftly spreading across the whole industrial sector, including in distribution centres and sorting operations. The adaption of Artificial Intelligence, Blockchain, Machine Learning and other new technologies has been bringing in a revolutionary change and creating a new modern world.
Zymergen, a leader in molecular manufacturing, uses cutting-edge genetics to effectively teach microorganisms to optimise current molecules and produce new ones, assisting in producing speciality chemicals, food and agriculture, electronics, and pharmaceuticals. With its innovative strategy, these items will be commercialised faster and become more cost-effective and environmentally friendly than those made from petroleum.
India's Growth Story
India is also undergoing a revolutionary change. With the third largest startup ecosystem in the world, India now attracts all big, medium and small venture capital firms by promising a huge market that innovations can drive. The growing number of Unicorns (105 till July 2022) showcases India's strong growth story. It is projected that by 2025, India may have over 1,00,000 startups employing over 3.5 million people, and the number of Unicorns may go up to over 200. India has become the largest digital payment contributor in the world. This attracts venture capital investment in financial services, especially FinTech. Investments in Indian startups are at an all-time high, and this is being driven by technology. A robust startup ecosystem not only contributes to India's growth story but also generates large employment and accelerates overall development. Like other parts of the world, India has been witnessing a revolutionary change and creating a new modern world with its robust startup ecosystem.