Micro VC funds are becoming more and more common in the Indian startup ecosystem. Recently, three ISB alumni announced a micro-VC fund, Atrium Angels, for startups. Taking a similar initiative, Bengaluru-based Gemba Capital that invests in pre-seed and seed rounds in tech startups from India has launched its maiden micro-VC fund of $10 Mn.
The fund will invest in 24 early-stage startups across SaaS, consumer tech, fintech, and deeptech sectors with the first cheque of $250K and a 35% reserve ratio for making follow-on investments.
Founded by Adith Podhar in 2019, Gemba Capital, which started as a family office making angel investments, has now funded pre-seed and seed rounds in 30 startups. Few notable ones include insurtech startups Plum and BimaPe, D2C startup SleepyCat, fintech Gripinvest, Walrus and Strata, agritech Unnati, edtech Crejo, SaaS startups Zuper and ClickPost and D2C eyewear startup Cleardekho.
Typically, micro-VC funds have a corpus of less than $30 Mn and they invest in 10-15 pre-seed and seed stages of startups, rarely going to post-seed. According to a recent report by IVCA, AWS and Praxis Global Alliance, the number of micro-VC funds in India has increased to 88 in 2020 from 29 in 2014.
Recently, the government also unveiled the Startup India Seed Fund of INR 945 Cr ($127.3 Mn) to financially support about 3,600 early-stage startups and 300 incubators. The fund would provide financial assistance for proofs of concept, prototype development, product trials, market entry and commercialisation of products or ideas.
In the past year, VC firms have become a suitable form of funding for small businesses and startups seeking colossal capital investment in their early stages of growth. The Inc42+ Annual Indian Tech Startup Funding Report 2020 shows that early-stage startups have raised $403 Mn at the seed stage in 2020 — nearly double the $255 Mn in 2019.