Venture Capital Funds (or VCFs) have managed to lock down investments worth Rs 7,296 crore in the second quarter of current fiscal alone, making it the best months for startup fund raising. In terms of capital raised, VCFs have raised Rs 1,107 crore between October 2015 and September 2016 – marking a clear 75% jump from the previous year. Actual startup investments have more than doubled over the past one year to Rs 926 crore as against Rs 431 crore mobilised between October 2014 and September 2015, the Sebi data revealed.
“The general feeling is that there’s a slowdown…but there’s no slowdown at all. There’s a steady flow of domestic money into startup now,” said Harish HV, a partner at Grant Thornton.
previous years, a lot of foreign funds invested huge sums of money into established startups like Flipkart and Snapdeal…Such large-ticket startup investments have stopped now. In its place, we’re seeing a lot of small-ticket investments from Indian investors, Harish explained.
According to sector watchers, the bulge-bracketed foreign funds of yore are now being replaced by Indians – mainly prosperous promoters, entrepreneurs who cashed out of their businesses profitably and wealthy family offices.
Adding more green to the hackneyed ‘greenshoots’, over a dozen new VCFs have registered with Sebi this year, presaging a possible “easing out” of cash crunch among early stage startups, fund managers said.
New fund offers
Ideaspring Capital, Pravega Ventures Trust, Healthquad Fund, Indian Angel Network, Imprints VC Fund, Montane Ventures and Pi Ventures are among asset management firms that have received Sebi approvals to launch VCFs.
Almost all these funds have chosen to limit their play to seed or early rounds as they feel startups with larger capital requirements are hovering well above their median valuations. “We’ll only target early stage rounds, which is still not over-heated.Valuation bubble (in start-ups) is mostly seen in late stages,” said Rohit Jain, Co-Founder of Pravega Ventures Trust, an early-stage technology startup fund.
“There are several quality start-ups out there, in diverse sectors, wanting seed and early-stage capital,” Jain added.
Venture funds are registered as Alternative Investment Funds (AIFs) by market regulator Sebi.
AIFs are broadly classified under three categories depending on the nature of funds, return profile, investment cycle and investment objective.Out of this, category-1 AIFs deal with start-ups, SMEs and social impact funds.
Within the broader AIF bracket, funds that specifically invest in startups are called VCFs. As on September 30, 2016, VCFs have received net fund commitments worth Rs 11,100 crore, drawn down capital to the tune of Rs 1,915 crore and deployed investments worth Rs 1455 crore.
“It is a good time to invest in the market. In the next six months, we are expecting a pick-up in Series-A funding,” says Anil Joshi, Managing Partner at Unicorn India Ventures, a Sebi-approved VCF .
Naganand Doraswami, Managing Partner at Ideaspring Capital Fund, concurred with Joshi: “It’s more of an investors’ market now… Valuation expectations of promoters have certainly come down. This makes it easy for us to pick good quality companies,” he said.
Tried ‘n’ tested ideas
Practically all new funds have spawned their investment themes around product innovation, education and healthcare sectors. Niche business ideas such as data analytics and cloud computing also rank high on the preference list of most funds.
“There are pockets of opportunity that will still attract money,” said Amit Varma, sponsor of the Healthquad Fund, which will raise Rs 65 crore in its first fund to invest in early-stage healthcare companies.
“We received commitment for 70% of the fund within four months of our inception. We’ve also received 30% of the fund as initial drawdown. We feel it’s a great success,” Varma added.
Source: Times of India