India's Internet startups come down to earth

THE Internet startup space in India, which enjoyed an unprecedented boom in the last two years, has now come down to earth as investors focus on building more sustainable businesses. The year 2015 saw nearly US$5 billion in venture capital and private equity money flowing into Indian startups, leading to soaring valuations.

E-retailer Flipkart became in 2014 the only Indian startup to raise US$1 billion in a single round, sending its valuation soaring to US$15 billion. Recently a Morgan Stanley fund marked down its value by 27 per cent to US$11 billion. Other big ticket deals were competing e-retailer Snapdeal, which was backed by Japan's SoftBank Group and Alibaba Group Holding Ltd, while a payment gateway Paytm also drew funds from Alibaba.

Now, as venture funding becomes more scarce and aversion to risk rises, deal values have been falling steadily since May last year when they touched a high of US$851 million. Instead, there are many more mergers and acquisitions by local companies.