Sectors that attract the most venture capital

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Investors and venture capitalists are willing to take substantial risks when it comes to investing in sectors such as edtech, online gaming and social media apps

For entrepreneurs seeking funds for their businesses, it can be difficult to find investors and venture capitalists who are willing to look beyond the risks and provide some financial cover.

When they do find them, however, getting the right amount of money from them to invest in their companies can be even harder.

Venture capitalists are careful with their investment funds for a myriad of reasons. However, despite the inherent risks, financiers invest in innovative enterprises partly in the hope that these ventures could soon become the next big thing.

Listed below are some of the sectors and industries which are of huge interest to investors currently, especially in the aftermath of the pandemic:
 

Edtech 

Education is one of the areas in India that has taken a long time to catch up with technology. The pandemic proved to be a watershed event in that edtech thrived as physical classrooms closed. With schools shut for months, lessons were delivered online to students.

Over the past year, edtech powerhouses like Byju’s and Unacademy have received millions of dollars in funds and gone on acquisition sprees to extend their dominion in this area. Unacademy, situated in Bengaluru, went on to join the exclusive unicorn club after raising USD 150 million from Softbank and others during this period.

Toppr (approximately INR 350 crore) and Vedantu (about INR 730 crore) were two other major firms that obtained funding. Several additional small and large edtech businesses raised financing in Series A and Series B rounds over the past two to three months.
 

Hard Tech

Artificial Intelligence (AI) and Machine Learning (ML)-powered technology firms, particularly B2B, have witnessed a spurt in interest from corporate clients due to businesses having to alter their strategies during the pandemic. As a consequence, these technology enterprises have become a lucrative industry for investors.

Observe.ai, a firm that develops AI-based transcription and analytics for contact centres, has secured USD 54 million in Series B financing. Yellow Messenger and Vernacular AI are two other prominent conversational firms that have secured Series B and Series A funding, respectively.

Tech firms that assist their consumers in mapping their demand are also a hit with investors. Infilect, a business that uses AI and Image Recognition to assist the retail industry gain better insight into store operations, omnichannel sales, and in-store merchandising, just secured a pre-series A round of funding. Entropik, another firm that utilizes AI to help marketers understand their clients, earned USD 8 million in a Series A investment in September.
 

Online gaming 

Staying home for months during multiple lockdowns has led to a noticeable increase in screen usage among Indians. Gaming applications make up a portion of this. Furthermore, the Indian government’s ban on 38 Chinese gaming applications, including PUBG, has prompted indigenous venture capital companies to focus on domestic gaming businesses.

Soon after the PUBG ban, Delhi-based Winzo Games received USD 18 million in a Series B round of funding to boost its content pipeline and target mobile-first gamers. In the pre-series A round, AFK Gaming, an e-sports content platform, raised USD 200,000. Investors’ interest in the fantasy gaming market has also increased. MPL and Dream11 both raised USD 90 million and USD 225 million, respectively, with the latter receiving the tournament’s title sponsorship.

Given the popularity of gaming in India, Lumikai, a Delhi-based venture capital firm, has formed a new fund to give early-stage finance to some of the country’s popular gaming firms.
 

Social Media Apps

The restriction on TikTok, a popular short video platform, has been beneficial for Indian app developers. Chingari, Mitron, and Roposo are just a few of the platforms that have experienced rapid growth. The Indian government has also supported them with their “Vocal for Local” campaign. Due to the high demand for these indigenous apps, firms have rushed in to invest in them.

While Mitron and Trell raised USD 5 million and USD 11.4 million in Series A, respectively, Chingari raised an unknown sum in three days. The money received was to be used for product development and staffing. ShareChat, a regional language networking platform based in Bengaluru, recently raised USD 40 million.

With the onset of the Covid-19 pandemic and the Fourth Industrial Revolution ushering in an ever-increasing use of technology, it’s no surprise that many venture capital funds are directed to software companies. Apart from these four categories, telemedicine and fintech businesses have also seen an increased demand and funding.

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