ETSA 2021: early-stage deal flow remains strong despite market volatility

Despite falling valuations of tech companies globally since the start of 2022, deal flow for early stage startups remains robust.

Several leading venture capital funds have focused on early-stage investing and trying to catch companies quickly.

Accel recently established a $650 million fund that will focus on seed investments. Sequoia has also focused on early stage startups with the launch of its Surge seed accelerator program.

Piyush Goyal, Union Minister for Trade and Industry, said at the ET Startup Awards in Bengaluru on March 12: “In my view, funding should not go to series B, C or D, it should instead go to Tier 2 or Tier 3 cities as seed funding.

The awards saw policy makers come together with the biggest names in startups to discuss the future of seed investment in local startups amid current market volatility.

“It is very difficult to predict where the market will be in the next 10 years, but there should be no reduction in start-up investments. Investors should choose great founders and work with them to build iconic companies,” said Shekhar Kirani, partner at Accel India.

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Kirani said the entire startup landscape has changed in 2022, causing several large investors to focus on seed funding.

“There are more extraordinary startups today. The quality of founders has improved dramatically, the quality of ideas has improved dramatically, and the way founders build startups and create value for consumers has improved significantly,” he said.

Investors also talked about changing trends and changing the proportion of round sizes for seed investments. The rush for IPOs in 2021 along with several policy changes has accelerated seed investments.

“As the pandemic has slowed things down, some policy changes and company listings have given start-up investors a boost,” said Anil Joshi, Unicorn India Ventures.

Investors see digitalization and crypto as the hottest sectors to invest in this year. “As a fund, we see few sectors that are big enough… the space around digitization and crypto and NFTs (non-fungible tokens), for example,” said Joshi of Unicorn Venture Capital.

Accel has focused on five major themes and will continue to focus on them in 2022, Kirani said. “Consumer businesses, B2B businesses, marketplaces, global SaaS, fintech and digital health tech will be at the center of much disruption,” Kirani said.

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