Every industry has a unique vocabulary and the VC industry is no different — words like pivot, platforms, and portfolio pop up in every conversation and every blog. But nothing is more common than the most-used term — pipeline. The pipeline, especially for early-stage startups, has been a big problem in India, showing up as a Series A choke every few years. According to data and current trends, it appears that the Series A is a real crunch.
As per Inc42 Datalabs, Of the startups that received seed funding in 2014, about 22% went on to receive Series A funding in 2015 and 2016, while of the ones that raised seed funding in 2015, only 12% received Series A funding later. For the 2016 seed-funded startups, the number was as low as 4%.
It is not surprising that a lot is happening in the early-stage funding space. Many new seed funds have come up. Existing seed funds have successfully raised their next fund (2x-3x larger). At the same time, VCs have become active in the seed stage and many corporate venture units have joined the fray.
We launched a new seed fund last week. But with seed stage funding exploding, why should the launch of yet another seed fund be news? In the last few days, whenever I have spoken about this to other VCs and early-stage founders, they’ve not only been curious to know more but have also asked me similar questions. In this blog, I aim to answer what’s new about the Axilor Seed Fund, how is it different, and why should a founder look at it.
Structurally, the main change is that the investments we will make going forward will be through a new Category 1 AIF — Axilor Technology Fund. But there is more to it than this. With the new Axilor Seed Fund, we have increased the corpus to $30 (INR 200 Cr). While most of our investments in the last two years have been in the (INR 1-2 Cr) ($250-300k) range, we are now looking to increase the ticket size up to INR 3 CR ($450-500k). This also means we will be as prolific as before in terms of the deals done every year. We will continue to focus on tech-led businesses in consumer, enterprise, fintech, deeptech, and healthtech — with a healthy appetite for emerging areas.
Beyond Capital: Adding Value
In the early stages, founders need to go beyond traction and find their product-market fit — consistent high growth, repeatable sales, a scalable business model, an investable narrative, et al. Hence, to help a founder succeed, a seed fund should be able to add value beyond capital. But that’s easier said than done.