IvyCap, a local early-stage VC, had received the attention of the whole Indian investor community when it had sold its partial stake in D2C beauty and cosmetic startup Purplle in March for $45.6 million with the clocking return of 22 times on a $2 million in 2015.
After it terminates the contract with Purplle which was valued at $300 million. It helped the Mumbai-based Venture capital firm to generate a return that is 1.35 times its entire fund value of INR 240 crore ($33 million). And apart from this, it has reinforced the confidence of local investors in micro VC funds.
Over the last few years, micro VCs funds, those with a corpus of around $30 million. They are primarily operating in the basic funding such as pre-seed, seed, and pre-Series A, which have gained increasing prominence in India. In the world’s third-largest startup ecosystem, the number of micro VC funds has increased to 88 in 2020 from a small space of 29 in 2014, according to a recent joint report by the Indian Private Equity and Venture Capital Association (IVCA), Amazon Web Services, and Praxis Global Alliance.
In the last three years, micro VCs are primarily backed by Indian family offices, high-net-worth individuals, promoters of listed companies, and institutional investors with a total fund of $341 million in the Indian startup ecosystem 730 deals across 566 startups. This trend has proceeded well into 2021, although early-stage deals have slowed down since the beginning of Pandemic. And as per the data collected by research firm Venture Intelligence, the number of early-stage deals came down to 86 in Q1 2021 from 144 in Q4 2020s.
Bearing high risk on the country’s early-stage startup ecosystem, micro VCs have been building their funding chests after limited partners (LPs). Those who invest in VCs began warming up towards the startup ecosystem again since the last quarter of 2020. In the mid-term of last year, LPs had put their startup funding on hold due to the market uncertainty amid the COVID-19 pandemic.
Artha Venture Fund, another resounding Micro-VC Firm has announced the closure of its debut fund at INR 220 Cr which was earlier intended to end at INR 200 Cr. Anirudh Damani, Managing Partner at Artha Venture Fund(AVF) says that the lockdown and digitizing economy has pushed them beyond their target easily.
The micro fund then targeted the close by July 2021, but achieved it two months early, with more than 50 LPs backing the fund. AVF aims to invest in 40 startups from the next fund by March 2023 in different areas such as B2B, D2C, and enterprise SaaS, with 35% of its fund money reserved for the first round and the rest reserved for the following rounds.
Anirudh A Damani, Managing Partner at Artha Venture Fund, said, “90% of the fund’s capital is local.” More than 50% of the investments came from family offices and listed companies directly or through the promoter entities.
Adding to the statement, the VC firm said “almost half of the LPs has increased their investment commitments in the last three months. So far, they have invested more than 25% of the total capital in 12 startups including Daalchini, LenDenClub, HobSpace, PiggyRide, Kabbadi Adda and Agnikul.”
At the beginning of this week, early-stage VC firm WEH Ventures launched its second fund intending to raise INR 100 crore ($13.6 million), double the corpus of its previous fund, to back to 18–20 startups. The firm said in a statement “WEH Ventures has already raised over half of its targeted corpus from CEOs and CXOs of major corporations in India and reputed family offices.”
Similarly, last month, micro VC iSeed said “it would launch its second micro fund worth $15 million to support 50 early-stage tech startups in various sectors for the next two years. From the first fund, launched last year, iSeed has invested in over 35 startups, including PagarBook, BimaPe, GoKwik, and Velocity.