Mumbai: While the size of venture capital deals grows in the US, Europe and China, venture capitalists continue to do more thrifty deals in India, according to the Quarterly India Venture Capital Report by Dow Jones VentureSource.

The median size of a venture investment in an India-based company in the first quarter of 2008 was $4.1 million, down from $8.3 million in 2007 and well below the medians seen in the US ($7.1 million), Europe ($4.5 million) and China ($10 million).

The Quarterly India Venture Capital Report covers venture capital investment specifically, which Dow Jones VentureSource defines as growth capital made available to entrepreneurial companies in exchange for ownership in the form of private securities.

These investments are often seen as shorter-term and do not include private equity investments such as leveraged buyouts or mezzanine and debt financing.

The report says that overall, the region attracted $99 million in venture investment with 16 deals completed, a 27 per cent drop from the fourth quarter that saw a record $135 million put into 17 deals.

"Venture investment in India did see a drop in the first quarter from the fourth quarter but it's not really accurate to compare this year's first quarter to the big spike we saw in the first quarter of 2007 when $513 million was put into 37 deals," said Jessica Canning, Director of Global Research for Dow Jones VentureSource.

"Our data shows that deal activity in India remains steady and the drop in investment during the first quarter is simply a result of smaller deals, not an overall pullback."

Highlights:
The report found nearly 67 per cent of all venture investment in India, some $67 million went to seven consumer / business services companies. The largest deal in this area was the $26 million third round for ClearTrip Travel Services, based in Mumbai.

The data showed that India's health care industry is still in its infancy, as only two bio-pharmaceutical deals totalling $11 million closed during the first quarter.

The information technology (IT) industry generated six deals in the first quarter, raising $19 million. The software sector was the most popular IT area, as it accounted for three of the deals and $10 million.

Canning added, "While other regional markets are weighed down by capital-heavy industries like health care and energy, India's modern economy is still in its infancy and everyday services like printing and travel booking are in high demand-and it takes relatively little capital and time to develop these kinds of companies."

In fact, of the 16 deals completed in the first quarter, 10 were for companies already shipping products and generating revenues while another three were for companies with established profitability. Together, they accounted for 90 per cent of India's quarterly investment.

The report also found that while first rounds made up half of all deals done in the first quarter with eight, nearly 52 per cent of all capital went to five later-stage deals.