RCompany background checks by foreign equity funds are denying Indian start-ups the capital they need to reach the growth stage after they’ve acquired seed funding by domestic investors.
While angel investors and accelerators have been broadly supportive of innovation in India across sectors ranging from IT to healthcare, closer scrutiny by larger foreign investors have stopped start-ups progressing to the next stage of funding by uncovering flaws in their business plans or company records. The ensuing funding chokehold – being felt particularly acutely for non-tech start-ups in India at the moment – has even given rise to its own terminology, known in venture capital circles as ‘Series-A crunch’.

Findings by Indian deal database VCCEdge illustrate this growing phenomenon…   Their research shows that while completed angel and seeding finance rose to 283 last year (up from 117 in 2011), Series-A deals fell to 74 from 119, over the same period.

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