The tech startup ecosystem in India has seen the emergence of a slew of new investors recently, many of whom are coming in to support with seed funding. Even as a Series A funding crunch is felt in the country with venture capital firms turning cautious, the new funds are coming in to provide an early lifeline for new ventures.
“Startup investors help seed the ecosystem, as they are willing to fund with smaller amounts of capital which is much harder for large funds. Young entrepreneurs also get valuable help in terms of business advice, product strategy, etc from the investors since these investors are often quite experienced,” said Ashish Gupta, senior MD, Helion Venture Partners.
He said there are not enough angel investors and that gap is also partially filled by seed investors. “These young companies form a pipeline of future larger companies,” he said.
According to Mukund Mohan, CEO-in-residence at Microsoft Accelerator for Windows Azure and an active angel investor, the rise of the new set of investors is a positive development for startups.
“Given the number of startups seeking funding is in the thousands, the more the investors that are available in the earlier stages (seed, angel) the stronger the ecosystem will become,” he said.
He said there are around 70 early stage and seed-stage investors who have been active in India for over a year.
However, a lack of funds is still plaguing the industry, as is evident from the shut-down of a few ventures. It indicates there is still space in the country for new investors.
Here’s a list of a few new early stage investors who are likely to play their part in financing ideas. Most of them have had a few investments to talk about though a few are yet to formally start investing.
Founded last year, Ixora Ventures is a Delhi-based venture fund which invests $25,000-$500,000 in early stage companies and is looking to invest in four-five firms this year. The fund is not focusing on any particular sector to invest. It has already three investments in its kitty—Learnpedia, Alma Connect and Warranty Asia. According to its founder and managing partner Nikhil Mulchandani, the fund is smaller than an average VC fund in India, which is usually more than $50 million. Mulchandani worked with the M&A department of a multinational firm in the energy infrastructure sector prior to setting up Ixora. He has also spent two years with the KPMG corporate intelligence team which was responsible for advising clients in private equity and venture capital sectors. Mulchandani had also set up his own venture in the insurance services sector, which was sold off early last year.
Blu Sky Venture Fund is a $35-million offshore VC fund which provides seed/growth capital to early stage ventures operating in the education, e-commerce and service sectors. It invests both in offline as well as online entities. Founded last December, the company is looking to invest in one company per quarter. The ticket size and per-stage funding depend on the requirements of startups. Blu Sky is owned and operated by Bangalore-based Blue Mountain Capital Management. It was founded by Geetha Bellu, an alumnus of Chartered Institute of Securities and Investment in the UK. She has decade-long experience in technology and financial markets companies, including Infosys and BgSE Financials.
The Habit Fund
Based out of Bangalore, The Habit Fund is a $75-100-million early stage fund which focuses on startups operating in social media, mobile and cloud computing verticals. The fund will process 300-odd applications every quarter and invest in a dozen companies. The average ticket size will be $150,000-$300,000. The Habit Fund will be operational by the next quarter though it has already shortlisted some startups for funding, as per media reports. The fund is managed by a Sunil Bhargava of Tandem Capital and Rohit Bhagat, former Asia Pacific chairman of BlackRock Inc. Manipal Education and Medical Group head Ranjan Pai and former Infosys director Mohandas Pai are also investing in the fund.
SeedSurge is a $18.5-million seed support fund launched by eHealth, a government-backed technology business incubator (TBI). Based out of Bangalore, SeedSurge is a sector-agnostic fund. However, it will initially focus on education and healthcare sectors. To begin with, it will focus on domestic entrepreneurs and NRI entrepreneurs with Overseas Citizens of India (OCI) cards. In the initial years, it will invest in 10 companies a year and may scale up to 20 gradually. SeedSurge is supported by a grant from the Technology Development Board (TDB) of the Ministry of Science and Technology. eHealth TBI director Rama Subramaniam will be part of SeedSurge.
IndiaQuotient is a Mumbai-based early stage investment fund with a corpus of Rs 25 crore ($4.5 million). Founded in 2012, it invests in companies operating in consumer-facing businesses targeting mass markets. The sectors include food, fashion, education and healthcare. The average investment size is $45,000-$180,000. The company is looking to invest in 20-25 companies by mid-2014. It has already invested in Engrave, RedQuanta, IIMJobs.com, Belita and The App Kiosk. IndiaQuotient was started by former SeedFund partner Anand Lunia, along with a group of entrepreneurs, including Kashyap Dalal of Inkfruit and Carwale founder Mohit Dubey.
Bangalore-based Harvard Business School Alumni Angels (India chapter) is a sector-agnostic (with a technology bias) angel investment network which invests $250,000-$500,000 in startups. Founded last year, it will focus on sourcing and investing in seed-stage companies across India and will explore working alongside existing networks, including Indian Angel Network (IAN) and Mumbai Angels. The firm has already invested in event ticketing company Ayojak.com. HBS Alumni Angels was set up by Raj Chinai, former principal of IndoUS Venture Partners (now Kalaari Capital), Srijan Capital; Ramesh Shah, chairman and director, RK Group; and Ravi Gururaj, vice-president (products and cloud platforms group) at Citrix.
Srijan Capital is a tech startup incubator-cum-seed fund founded in July 2011 (its operations started last year). Srijan is focusing primarily on startups operating in e-commerce, SaaS, mobile, social media and consumer Internet. The firm typically incubates and invests in companies that focus on B2B or Business2Small Business segments. The average ticket size is $3,500-$27,000. However, the investment size can stretch to as much as $90,000. It is currently focusing on startups based in Bangalore. It has already invested in three companies—Aurality, ConsumerDaddy and Ayojak.com. Srijan was founded by Ravi Trivedi, an MBA holder from Duke University. He has several years of experience in investments, digital marketing, product development and software engineering. He currently works as a principal at Southeast Interactive Technology Funds, an early stage technology VC fund in North Carolina in the US. Prior to this, he worked as equity analyst with Bank of America.
Founded in 2011, Naya Ventures is a $50-million early stage investment firm which focuses on India and US-focussed companies operating in the mobile and cloud space. It invests anywhere between $250,000 and $3 million in startups. It has already invested in BoxFish, GlobalOutlook, Glympse, Zoomingo, etc. Headquartered in Dallas, the company has its India office in Hyderabad. It was founded in 2011 by Dayakar Puskoor, executive chairman at Motivity Labs and at GlobalOutlook; Prabhakar Reddy, an active angel investor and board director at GlobalOutlook and Motivity Labs; and Gowri Shankar, former president and CEO at SinglePoint.
Startup Village Fund is an early stage venture capital fund launched by Kochi-based incubator Startup Village. It will invest $20,000-$250,000 in startups across the country. The $10 million VC fund, which recently got SEBI approval, will mostly focus on companies operating in the Internet and telecom space. The new fund also has a greenshoe option to raise another $10 million. Startup Village’s debut investment is expected towards the end of this year. The fund will be managed by Sanjay Vijayakumar, co-founder of MobME Wireless. Infosys co-founder Kris Gopalakrishnan, RP group founder Ravi Pillai, the founders of MobME as well as a few industrialists and leading angel investors will be part of the fund.
Silicon Valley-based incubator-cum-seed fund 500 Startups has picked a few Indian startups in its batches in the past and is now raising a micro-fund christened 500 Startup Wallah which will specifically invest in India. The fund with a corpus of $5 million will allow the firm to write small cheques of say even $25,000. The fund is headed by Pankaj Jain, co-founder of HeadStart Network Foundation. He has co-founded several startups in network security, online marketplaces and social media analytics. Paul Singh, who has worked with PBworks, AOL and Symantec, is also part of the fund.
[Editor’s Note: This is a republication of the post that appeared on VCCircle.]