According to the Quarterly India Venture Capital Report released today by Dow Jones VentureSource, during the second quarter of this year, venture capitalists were keen to back the advertising start-up companies in India. Reportedly, about $89 million, nearly 37 percent of the region’s total quarterly investment went to five advertising/marketing companies. This was the highest percentage among any other sector. The quarter accounted for $238 million over 17 deals for India, an increase of 120 percent over $108 million invested in 12 deals during the same period in 2007.

According to Jessica Canning, Director of Global Research for Dow Jones VentureSource, “We’ve seen deal activity in India hold steady for three consecutive quarters but this most recent quarter posted the second-highest investment total on record, due in large part to the $70 million second round for Laqshya Media of Mumbai, the second-largest deal ever completed in India,” “This highlights two growing trends within the region — one being a growing interest in advertising plays that capitalize on India’s emerging infrastructure and growing Internet usage; the other being an increase in second-round deals, which is expected as VCs are helping their portfolio companies expand and steering them toward liquidity.”

According to reports, during the quarter, India had seven second-round deals, garnering a record $161 million and exceeding the $118 million, which was invested in second round in all of 2007. Ten seed and first round deals accounted for about $77 million in investment.

During the second quarter, India’s Business & Financial Services industry, including the advertising/marketing sector, received investment of $131 million over nine deals, while the Information Technology (IT) industry, recorded three deals with $33 million worth of investment, a decline of 55 percent from the $73 million invested in nine deals during the same period in 2007.

Canning said, “While the size of venture deals in the U.S., Europe and even China continues to climb, venture capitalists have shown some restraint in terms of investments in India, due largely to the risk still associated with this emerging region. In fact, since we began tracking venture investment in India, the median deal size has dropped from $17 million in 2005 to $10 million in 2006 and now to $8 million in the first six months of 2008.”

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