Success stories of Indian venture funds (2024)

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Success stories of Indian venture funds? ›

Backed by venture funds like Accel and Tiger Global Management, Flipkart revolutionized the e-commerce landscape in India and was eventually acquired by Walmartfor a staggering $16 billion. Another notable success story is Ola, India's leading ride-hailing platform.

For now, you'll find that venture capital success rates are quite low. According to Shikhar Ghosh, a senior lecturer at Harvard Business School, up to 75 percent of venture-backed startups don't succeed in that they never return cash to their investors.

The median net investment rate of return for 2021-vintage venture funds was 2.1%, compared with 12.3% for 2020 funds, according to analytics firm Preqin, which surveyed results from investment firms backing early-stage and late-stage private companies.

Experts from The National Venture Capital Association estimate that 25% to 30% of startups backed by VC funding go on to fail.

The Consequences of a VC Backed Startup Failure

For starters, VCs may lose the money they invested in the failed startup, as well as any fees that were associated with the investment.

Several articles and research papers have been published on the PME and the comparison of VC versus public stock performance. These studies often show that top-tier Venture Capital funds outperform public markets, while the median or average VC fund may underperform.

Simply put, 80% of the returns come from 20% of the deals. The 80-20 rule can be seen in both natural and man-made phenomena such as the size of earthquakes, the size of solar flares, the distribution of wealth and movie ticket sales.

Given the high failure rate among new companies, VC investors often refer to 100/10/1 rule of thumb , which involves reviewing 100 startup pitches, conducting due diligence on just ten of the 100 reviewed and selecting only one of the ten as an investment.

The TLDR; seed investors shoot for a 100x return; Series A investors need an investment to return 10x to 15x and later stage investors aim for 3x to 5x multiple of money. This translates into portfolio returns from 20% to 35% targeted IRRs.

Who is the richest VC? ›

Peter Thiel in Zero to One: > The biggest secret in venture capital is that the best investment in a successful fund equals or outperforms the entire rest of the fund combined.

Most venture funds have a 10 year time horizon to invest all of their capital and then return the profits to the fund's investors. There are exceptions to this 10 year life cycle, but that is fairly standard.

While venture capital funding can greatly enhance a startup's chances of success, it's important to recognize that not all ventures funded by VCs thrive in the long run. Approximately 25-30% of startups backed by venture capital fail, representing 3-4 out of every 10 companies.

About 90% of startups fail. 10% of startups fail within the first year. Across all industries, startup failure rates seem to be close to the same. Failure is most common for startups during years two through five, with 70% falling into this category.

Generally, VCs are likely to get an exit less than 1 in 5 times i.e. VCs don't even break-even unless they get better than 5x return on any individual deal. Most of the VCs probably lose money on their deals and probably less than 10-20% beat the risk adjusted rate of return for other less liquid asset classes.

The failure rate of venture capital-backed companies is high, with estimates ranging from 50% to 90%.

Even the top VCs fail on about 80% - 90% if their ventures, according to one of the most successful VCs in the U.S. The top 2% earn high returns because they finance home runs. VCs need home runs to do well, and most VCs stink because they do not fund home runs.

The reality is that clustering in major markets hasn't generated a gusher of VC money for diverse founders. Just 0.48% percent of all the VC funding in 2023 went to Black founders, data from Crunchbase shows.