This article is part of Inc42’s special year-end series — 2019 In Review — in which we will refresh your memory on the major developments in Indian startups this year such as the major funding deals, their impact on various stakeholders from entrepreneurs, to venture funds and VC investors. Find more stories from this series here.
The Indian startup ecosystem would not have achieved the growth and stature without the presence of some critical investors, venture capital funds, seed funds and more. From angel investors to venture capital funds, investors across the board have invested time and money for the growth of the ecosystem over the past few years and even global investment giants have launched India-focussed funds that are meant to back the innovation happening in the Indian market.
Over the years, investors have funded early-stage ideas that blossomed into unicorns and some are now even reaching the point of IPO. While all VCs are looking for successful exits, this has been a rare sight in the Indian ecosystem so far.
Today, VC money is invested at all stages of startup growth, starting from seed and early-stage funding to growth-stage, and late-stage ventures. The good thing about the Indian startup ecosystem is that VC investors have not shied away from backing startups early. This is down to the fact that there’s plenty of opportunity for the right service considering the untapped market. This year as well, several large and small VCs and investors, launched new funds for the booming Indian startup ecosystem.
As the year ends, we take a look back at the funds launched by venture capitalists and their plans for fund deployment.
SoftBank Vision Fund II
After deploying $97 Bn of its $100 Bn Vision Fund, Japanese conglomerate SoftBank this year announced that it will raise second Vision fund of $108 Bn to invest in disruptive startups leveraging new-age technologies. SoftBank wants to use this fund to invest in 100 companies across the globe.
Softbank has made 88 investments from the first fund and will not be making any more new investments from that fund, saving the remaining corpus for follow-on rounds. After the debacle with WeWork, where SoftBank had to bail out the company which failed to go public due to corporate governance issues, SoftBank has now decided to narrow down its portfolio to the companies that have a clearer path to profitability and IPO.
The concerns on investment strategy after WeWork has caused troubles for Vision Fund II as well, as the reports surfaced that Softbank may fail to achieve its target of $108 Bn.
Accel Partners’ Sixth India Fund
One of the most prominent VC firms in Silicon Valley with $1.5 Bn assets under management, Accel Partners this year closed its sixth India-focussed fund at $550 Mn. The firm has said that it will continue to scout for early-stage deals across consumer internet, enterprise, financial services, healthcare, and software as a service (SaaS) startups.
From Accel India’s $450 Mn fund, it has seen 70% of investments in the range of $2 Mn or less. Accel Partners’ fund deployment cycle is typically between 3-4 years, with close to 80% of deals being less than $2 Mn. It plans to invest in around 60 companies from the sixth fund.
The fund also has an active operating team to support portfolio in areas including product and scale thinking, brand and digital marketing, organizational scaling and culture, and financial metrics.
Mumbai-based venture fund Unicorn India Ventures announced the launch of its second equity fund with a corpus of INR 400 Cr. The early-stage venture fund will focus on investments in Pre Series A and Series A rounds across sectors such as SaaS, fintech, healthtech, robotics, gaming and digital content.
Its investment philosophy would be to enter at an early stage with an average investment size of INR 3-5 Cr. and follow on with Series A and B rounds. The investment size could go up to INR 10-30 Cr in the follow-on rounds, the firm said.
From its first fund of $15 Mn, Unicorn India has invested in 18 companies including on-demand beauty service provider VLCC VanityCube, cybersecurity startup Sequretek, pharma supply chain enabler Pharmarack.
This year, Sequoia Capital intensified its focus on early-stage startups. The firm launched early-stage focused accelerator Surge and is expected to invest over $100 Mn over the next four-five years under its accelerator programme. Surge will target startups both in India and Southeast Asia across sectors such as consumer internet, deeptech, enterprise software, healthcare technology, fintech and direct-to-consumer brands.
This year, the VC firm registered its seed fund in Mauritius under the name of Sequoia Capital India Seed Fund I Ltd. The filings showed that it is expected to close the fundraise for this new fund in one year. The fund is expected to raise around $150 Mn-$200 Mn. Surge has so far backed two batches of startups, with the latest batch announced in October this year.
Sequoia India had earlier said it would look at more investments in early and growth-stage startups, targeting technology, consumer and healthcare sectors across India and Southeast Asia.
DSG Consumer Partners
Early-stage venture capital firm, DSG Consumer Partners (DSGCP) made an interesting record by closing its third fund within four months of the launch. The firm close the fund at $65 Mn and will scout for investment opportunities across personal care, baby, pets, food and beverages, vitamin supplements, travel and hospitality, financial services, wellness, femtech and sexual wellness sectors.
Through fund-III, DSGCP will invest between $500K and $2 Mn in around 20 ventures spread over a three-year lifecycle which is almost the same funding range as that of the previous fund with the main difference being a hike in the low-end range which was $250K previously.
DSGCP says it has the flexibility to provide growth capital and to provide liquidity to founders and shareholders through secondary transactions. The firm has built a reputation of investing for the long-term with an investment span of six to ten years.
Eight months after venturing out on their own, former Sequoia executives VT Bharadwaj, Abhay Pandey and Gautam Mago closed their first maiden fund. In November 2018, the trio came together to launch A91 Partners, a venture capital firm focussing on mid-stage startups. And in July, A91 successfully closed their Fund I at $351 Mn.
A91 Partners is focused on making mid-stage investments, in Series B and C deals ranging between $10 Mn and $30 Mn. Foreign LPs such as The International Finance Corporation, Asia Alternatives, Adams Street and Swiss-based LGT Capital Partners have participated in the fund.
It was further speculated that the fund will deploy as much as 65% of its capital to back consumer products and services firms, with the balance going into healthcare and financial services.
A91 Partners has already made investments in Mumbai-based make-up brand Sugar Cosmetics and Hector Beverages which owns popular drink brand Paper Boat.
This year, venture capital firm India Quotient has made the final close of its $60 Mn fund. The fund saw investments coming in from a large China-based fund, few angel investors from China, and some large family offices who did not wish to be named. Other limited partners (LPs) include MakeMyTrip’s CEO Deep Kalra and Paytm’s founder Vijay Shekhar Sharma.
Additionally, the fund was also backed by India Quotient’s existing investors such as Gulf-based Indian businessman BR Shetty, Flipkart’s cofounder Binny Bansal, and Singapore-based family office of Rajesh Bothra RB Investments.
With the primary funds, the venture capital company is planning to invest in 20 early-stage startups, with the first cheque between $250K to $1 Mn and will seek 15-20% ownership in them.
It is also planning to raise an additional $40 Mn opportunities fund to invest in its existing top-performing startups. With a total $100 Mn in the bank, the venture capital company plans to deploy it over the next two years.
US-based curated closed marketplace for startups and investors, AngelList, this year launched an India focused fund – The Collective.
The company had launched a similar fund in the US called Access Fund in 2016. India is the first country outside the US to get such a dedicated fund. Primary investors in this fund include Bain Capital Ventures’ Salil Deshpande, Flipkart cofounder Binny Bansal, Avnish Bajaj of Matrix Partners, DST Global’s Rahul Mehta, Navroj Udwadia from Falcon Edge Capital along with other venture funds such as Kalaari Capital, Beenext and more.
The Collective will invest about INR 1 Cr each in 60-80 startups annually. This fund will also give quick capital access to AngelList’s Syndicate leads.
Further, the firm also launched Angel fund, which will enable individuals to raise small amounts of capital and then deploy it over the course of the next six to twelve months. The structure of the fund is designed in such a way that it will enable fund managers to make a 15% cut for their expertise, while AngelList will receive a 5% platform fee on the fund.
Chiratae Ventures (formerly known as IDG Ventures) launched a $35 Mn seed fund to focus on such early-stage investments. The average ticket size for investments through the fund would be between $500K to $1 Mn. Chiratae will continue to focus on early-stage startups and has close to 75 ventures in its portfolio, including the likes of Nestaway, Myntra and Bounce.
The firm also closed its first close of Fund IV at $150 Mn. It aims to raise $275 Mn for this round. Chiratae claims that till now, it has raised 60% of its capital for this funding round from Indian investors.
The funds are supposed to be utilised to invest in seed rounds, early investments and expansion stages. However, by launching this new separate fund, the VC firm has shown its seriousness and focus on seed funding.
Early-stage investor Kae Capital raised its third venture capital fund of up to $60 Mn. With the new funding, the company is expected to increase its funding ticket size to start from a million, compared to the existing ticket size of $500K-800K.
The company has close to 70 investments. Kae Capital has also been working with Mumbai-based wealth management firm to market the funds. It also aims to attract limited partners (LP) and investors in a venture capital fund through this partnership. Its current LPs include Small Industries Development Bank of India, MakeMyTrip founder Deep Kalra and Infosys cofounder Kris Gopalakrishnan.
Mumbai-based integrated incubator Venture Catalysts announced the launch of the $43.41 Mn (INR 300 Cr) 9Unicorns Fund.
9Unicorns Fund will identify high potential early-stage businesses across sectors including electric vehicles, mobility, augmented reality VR, AI and ML, fintech, retail and FMCG startups. The fund aims to be a one-stop mentoring, networking and growth facilitation platform for emerging businesses to grow to their full potential.
Of the INR 300 Cr, it plans to invest in more than 100 companies every year, promising a standard deal of INR 60 Lakh for 5% equity. This would also include further scope to invest INR 3 Cr – INR 5 Cr during subsequent funding rounds for startups that show sustained promise over a period of time
Corporate Startup Funds And More
Beyond larger investment funds launching new funds, this year we saw various other corporates as well as new venture capital firms setting up base too. For instance, prominent angel investor Sanjay Mehta launched his new VC firm, 100X.VC.
100X.VC aims to invest in 100 startups every year. The team said that it goes beyond funding and opens network, expertise and resources that assist founders in crafting a scalable business model. 100X.VC is a sector-agnostic fund and will focus its investments in companies across a broad range of industries.
Bengaluru-based 3one4 Capital announced the final close of its Continuum I and Rising I fund at INR 400 Cr and INR 45 Cr towards the end of 2019. While Continuum I, which was launched in early 2019, will focus on Series B and above round in existing portfolio companies, Rising I will enter into deals with idea stage and seed-stage companies which includes new and follow-on investments.
Further, corporates like Procter & Gamble, Wipro etc launched their startup focused funds. As the Indian startup ecosystem moves forward to support disruptive ideas, investors continue to be the leading cheerleaders and supporters.