VC funding creates smooth roads for the automobile business

With the slew of new cars unveiled for the Indian market at the Auto Expo held earlier in January, it will come as no surprise that India has fast emerged to become the ninth largest automobile industry in the world. In fact, US-based consultancy Keystone has predicted that India will become the world’s third largest automobile market by 2030, behind just China and the US, and is currently growing at a compounded annual growth rate (CAGR) of over 12 percent. This leaves little doubt that the market for new cars is growing exponentially; an even more interesting trend is that as the concept of ‘pre-owned’ cars in the country finds acceptance, used cars are also finding enthusiastic buyers. 

This leaves no doubt that, while the market for new cars is growing exponentially, the used car market is also going to see a rapid transformation in the coming years.

According to the Federation of Automobile Dealers’ Association, the used car market has grown at a CAGR of 20 percent over the last five years. However, on an average, only 16 percent of the used car sales take place in the organized sector, creating a huge business opportunity for players in this segment.

In developed markets, B2B exchanges are a critical part of the auto industry ecosystem where the market is largely evolved and organized. However, in India the concept of business investment in buying second-hand automobiles is still nascent and there is skepticism among the buyers. In this sense, the growth of the auto industry in India warrants the presence of a structured platform that facilitates sellers and buyers for transacting used vehicles in a trustworthy, yet simple manner. Customers are looking for that one-stop shop that can provide them end-to-end services, from choosing the right vehicle to its financing and clearance of the necessary certifications involved.

Creating business models that address this need have become crucial, as it possesses great potential in the B2B segment in India, and to support these new ideas, investments are indispensible. In recent past, there have been many sites which have come up facilitating the sale and purchase of new and old cars while giving a sneak preview of the vehicle features.

Fueling the growth of a more organized and evolved exchange platform, Canaan recently invested in MotorExchange.in, a unique example of a one-stop solution provider to customers offering transparency, reliability and security in transactions. The site provides sellers the most efficient price in defined timelines and professional buyers the largest choice of vehicles and products along with dedicated and inhouse certification.

Traditionally, the automobile segment was not the ideal investment option for VCs, but in the last five years, many of them have placed successful bets on unconventional business ideas in this segment, including online portals which facilitate the sale and purchase of new and old cars, provide financing assistance, and offer certifications that guarantee the best value to users.

Alok Mittal, Managing Director

Portfolio News

iYogi, the on-demand tech services company with a unique global delivery model of direct to consumer and small business technical support, recently raised $15 million in its third round of venture funding. The funds raised would be utilized for enhancing services; expanding the team of global tech experts and building on the significant growth experienced in the last year.

iYogi, also announced a $50 million dollar contract with Ventura (subsidiary of Next PLC), a certified provider of outsourced support services. Through this partnership with Ventura, the company aims to expand its footprint and its security services to protect consumers and small businesses from growing threats of online viruses and spyware. 

BharatMatrimony, India’s No.1 matrimony portal, recently bagged the ‘Red Herring Global 100 Award’. The company is the only Consumer Services Internet Company in India to have won this prestigious award. Consim (formerly known as BharatMatrimony) also boasts to have bagged the Red Herring 100 Asia Award in its very first participation.

Liquidia Technologies, a privately-held nanotechnology company that develops rationally designed particles and films for a variety of life and materials science applications, recently raised $20 million in a third round led by Canaan Partners. The additional money from the fundraiser will be used to move Liquidia’s lead vaccine candidate through initial clinical evaluation and expand development of products for other therapies.

Elevation Pharmaceuticals, a biopharmaceuticals firm developing treatments for respiratory diseases, recently raised $30 million in a Series A venture round of funding. Canaan Partners, an existing investor, also participated in the round. Brent Ahrens, General Partner at Canaan, joined Elevation as its Board of Directors. The fresh investment will enable development of its first candidate through mid-stage clinical trials as well as begin development of a pipeline of product candidates targeted at underserved patient subpopulations with respiratory disease.

Events

IBFMedia event on Cloud Computing,: The event will be held on February 25, 2010 at Ista Hotel, Bangalore, showcasing some of the latest trends in cloud computing. The event is poised looks at some of the successful business models and companies in this emerging technology area. The panel will be composed of successful venture investors from the Indian venture capital industry as well as technology executives from companies in India that are succeeding in this space