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VCs set out to raise fresh capital in India

There are close to a dozen seed and series A focused funds that collectively plan to raise anywhere between $300 and $350 million, as per industry estimates.

, ET Bureau|
Aug 13, 2019, 08.26 AM IST
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BENGALURU: Early-stage technology and startup deal activity is set to intensify further with venture capital firms such as Accel Partners and Lightspeed Venture Partners expected to raise fresh capital and several other funds, both old and new, stepping up investments in the country.

Apart from the bigger and better known VCs, a group of funds from the United States, Japan, South Korea and China, which were looking at India from the sidelines, are now co-investing with the larger funds. These include General Catalyst, Akatsuki Entertainment Technology, Korean Investment Partners, Qiming Ventures, Morningside and and a clutch of family offices. Others such as Steadview Capital, Falcon Edge, Shunwei Capital, Ribbit Capital, Venture Highway, Mirae Asset Management and Beenext have also stepped up deal volumes significantly.

Accel, an investor in unicorns Flipkart, Swiggy and Freshworks, is expected to hit the road to raise $500 million later this year, while Sequoia Capital has extended its $695 million sixth India and Southeast Asia fund by $200 million, said sources. Sequoia, the Silicon Valley heavyweight, is also closing a $200 million fund for its seed-stage programme, Surge, which ET first reported on April 3.

Others in the fundraising process include Chiratae Venture Partners (formerly IDG Venture Partners), which plans to raise about $300 million; Lightspeed Venture Partners, which is targeting about $200-250 million, and Kalaari Venture Partners, which said earlier this year that it looks to raise $200 million.

Emailed query sent to Accel Partners, Sequoia Capital and Lightspeed did not elicit a response till press time on Monday. The Mumbai-based India Quotient also said recently that it will close its $60 million fund by September, while Water-Bridge Ventures has begun the process to raise its second fund.

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Heightened Interest
Apart from these, there are close to a dozen seed and series A focused funds that collectively plan to raise anywhere between $300 and $350 million, as per industry estimates.

The heightened interest comes at a time when the Indian startup ecosystem has seen a bunch of secondary exits and rising valuations, investors and other industry stakeholders told ET. A stable government and strong macro-economic fundamentals also have a role to play, they said.

According to startup industry tracker Tracxn, the money poured into Indian startups increased by 30% to $4.7 billion in the first six months of 2019, compared to the same period last year.

“With each cycle, the early-stage VC ecosystem is getting larger in terms of number of funds. Even with a generalist early-stage tech fund like ours, the team members are getting more specialised in the sectoral thesis that they track and invest into,” said Karthik Reddy, co-founder, Blume Ventures. Blume is set to close its $80-million third fund later this year.

One immediate effect of these big corpuses is that founders are skipping angel rounds and opting to raise larger first cheques, averaging over $1.2 million, from institutional investors, data sourced from Tracxn shows.

Funds typically raise money from Limited Partners (LPs), which include endowments and pension funds, sovereign funds, corporates, fund of funds, family offices and high net-worth individuals. LPs, who are sponsors in funds globally, have been actively looking at attractive secondary exits and improved paper valuations.

Funds are also approaching LPs earlier than planned due to the fear of a market downturn and uncertainty around elections in the United States next year, along with the fact that venture capital investments in China are slowing.

“LPs (both foreign and domestic) are now warming up to the Indian VC asset class, buoyed by return of capital from recent exits and the overall optimistic view that the Indian VC story is finally becoming real,” said Sarbvir Singh, managing partner at WaterBridge Ventures.

Last month, ET reported that funds were set to mop up more than $2.5 billion as they sell a portion of their stakes in companies such as Oyo, Byju’s, PolicyBazaar, BookMyShow, Freshworks, Lenskart, Delhivery and Swiggy to investors including Tencent, General Atlantic, Soft-Bank, Temasek and Hillhouse, among others.

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