A four-fold increase to $2.3 billion, across 51 deals, seen this year

Tamil Nadu has an impressive score in terms of attracting investments in start-ups in 2018.

The State managed to get private equity (PE) and venture capital (VC) investments to the tune of $2.3 billion in 51 deals, against $0.6 billion across 42 deals in 2017.

Data collated (as on December 25) by Venture Intelligence, a research firm focussed on private company financials, transactions and their valuations, show that nationally PE-VC firms invested about $31 billion (across 709 deals) compared to $24 billion (734 deals) in 2017. In terms of angel investments, the State concluded 12 deals this year, the same as in 2017. At the national level, there were 185 angel investment deals as on December 25, against 197 deals in 2017.

Arun Natarajan, founder and managing director of Venture Intelligence, said 2018 was very strong in terms of Growth Capital funding — especially in the second half, catalysed by the Walmart-Flipkart deal. He pointed out that attracting early stage funding, especially Seed and Series A, has not been easy.

“The Income Tax Department sending out notices to start-ups and their investors, trying to collect the draconian ‘Angel Tax’ had a chilling effect on angel investments,” he said.

A few days back, several start-ups across the country received Income Tax (I-T) notices on angel funding they received few years ago. The notice demanded them to pay 30% of angel money as tax.

Mr. Arun indicated that with volatility in the public markets and national elections round the corner, it would not be surprising if there is a pause in the mega funding of growth stage start-ups.

Especially given that several of them, including Oyo, Swiggy, Freshworks and Byjus, have all bulked up with mega rounds in 2018.

But even if funding for B2C internet and mobile and even Fintech startups takes a breather, the enterprise tech space that Chennai start-ups tend to specialise in (given their much smaller funding requirements) can be expected to continue attracting investors’ attention, he said.