As Market Struggles For Funds, PE Firm General Atlantic To Invest $2 Bn In Indian & SEA Startups

US-based private equity firm General Atlantic will invest $2 Bn in Indian and Southeast Asian startups over the next two years. According to a Reuters report, falling valuations of startups have attracted the PE firm to pump funds amid market volatility and the rising crises in the country’s startup ecosystem. 

Besides India, the PE firm is keen on backing startups from Indonesia and Vietnam.

General Atlantic is a four-decade-old growth-stage investment firm with an AUM of over $84 Bn. The fund has backed over 440 firms including the likes of edtechs BYJU’s and Unacademy, Indian conglomerate Reliance, insurtech Acko, proptech Nobroker, among others.

According to the company website and other reports, it had invested in only five startups in 2021 (only one of them in India).

As it plans to relook investments in India (and SEA), it is reportedly in talks with about 15 startups in sectors such as fintech, SaaS, ecommerce, consumer services, etc. 

In an interview at the World Economic Forum, Sandeep Naik, General Atlantic’s head of business in the Indian and Southeast Asian region stated that the PE firm was waiting for the value creation to happen and it is ready to open its purse strings now.

Value Creation In Indian Startup Ecosystem

Of late, the Indian startup ecosystem is marred with value correction, market instability, high profile controversies and reduced investor sentiment. Inc42, in its 2021 Funding Report had predicted that a 24% correction is likely to happen in the country’s funding ecosystem. 

Where Indian startups raised $42 Bn in 2021, it is expected that only $32 Bn will be raised in 2022. Of this, $12 Bn was raised in the first quarter of 2022, after which the average weekly funding in India has gone down. Last week, Indian startups raised $419 Mn – a mere 5.8% week-on-week rise.

On the flip note, one of India’s major VC firms, Sequoia India and its portfolio companies have been in controversies for the last couple of months. Singapore-headquartered B2B fashion ecommerce startup Zilingo, fintech startup BharatPe and social commerce startup Trell have been under media scrutiny for the past couple of months, with Inc42 duly reporting on the exercise of the due diligence process.

Amid the controversies, Sequoia India has put a pause on its $2.8 Bn fund for the Indian and SEA startups, catapulting the ecosystem into a dark phase. Not only Sequoia, but SoftBank, too, has put a pause on its investments across the world, and even in India, especially after its existing portfolio companies displayed weak results on the stock exchanges.

Funding In Early Stage Startups Is On The Rise

The late-stage startup ecosystem in India is ripe for value correction, but value creation as General Atlantic was looking for, is happening in the early-stage startup ecosystem in India. With nearly 14K startups added in FY22, alone, seed- and growth-stage funding in India has risen by over 350% year on year.

Thus, lately, many sector-centric and early-stage funds have been launched in India. Some prominent names include:

• Aavishkaar Capital’s Fund VI of $130 Mn to focus on sustainable agritech, financial inclusion and climate tech-focussed essential services segment
• Speciale Invest’s Continuity Fund I of INR 286 Cr to focus on enterprise software products and industrial hardware products
• Inflection Point Ventures’s AIF CAT II Physis Capital – a $50 Mn fund
• AI and Robotics Technology Park in association with IISC Bengaluru launched a $100 venture fund
• Omnivore’s $130 Mn fund for tech-enabled startups working in agriculture, food, climate and rural economy
• Gemba Capital’s $13 Mn micro VC fund
• Arkam Ventures’s $106 Mn maiden fund, among others.