Private equity funding losing interest in start-ups, says Goldman Sachs

Private equity funding is on a decline from last year, says a report by global research firm Goldman Sachs. As per the report, it declined by 25% year-on-year and fell to $1.9 billion in 2016, as compared to $2.5 billion in 2015. Even though the number of deals went up by 52% year-on-year in 2016, it was the average deal size that fell by 51% to come down to $4.3 million. Capital flows, which stood at $4bn in 2015 Q3 at peak, started to recede afterwards.

This slowdown has forced Indian start-ups to lower their cash burn rates while focusing on restructuring operations so that they can improve profitability.

However, the companies that have already attained a balance in their operations are not as such affected by this slowdown and are able to smoothly raise their capital.

"The newer ones are finding it more difficult," said the report. "Forced consolidation has led players with stronger balance sheets/scale to acquire the weaker companies in some cases," it added.

As per the report dated June 15, 2016, Indian e-commerce, on the other hand, has received a healthy capital inflow, climbing to over $8.4 billion in 2015 as compared to $6 billion in 2014.

The international e-commerce market is expected to grow at 20% in the coming three years with China and India being the major influencers. By 2020, the e-commerce space in India would touch $100 billion, driven by an increase in consumers' willingness and increase in access to mobile internet.

Image source