The higher-threat higher-reward game at the seed stage level, which yielded handsome returns for early investors of Flipkart, Ola, OYO, Zomato, Swiggy, and other folks, has helped blossom the micro or seed venture capital ecosystem in India in the previous handful of years. Angel, seed or micro funds, clubbed in the category of micro VCs, which normally have a sweet spot of $500k-2 million per deal, have grown from 29 in 2014 to 88 in 2020. The rise in micro VCs in India has been driven by the expanding quantity of startups across sectors, the industry gap involving angel investments and mid-huge size institutional investors. Domestic restricted partners (LPs) have also joined the party for much better return prospective, compact cheque size requirement, deep operational experience, versatile deal terms, and co-investment possibilities, according to a report by Indian Private Equity & Venture Capital Association (IVCA), Amazon Web Services and Praxis Global Alliance. Some of the prominent micro VCs in India presently are 100X VC, Pravega Ventures, 9 Unicorns, Artha Venture Fund, and more.
These micro VCs and other folks have invested $341 million in 730 bargains across 566 startups involving 2018-20. From $86 million in 183 bargains across 131 startups in 2018, the ecosystem has expanded to $139 million in 310 bargains across 256 startups. The top rated sectors attracting maximum capital have been software program as a service followed by customer-focused apps and platforms, e-commerce and listing platforms, FMCG, BFSI, and other folks in 2020. Niramai, Open, Dukaan, Airmeet, Milkbasket, Truly Madly, Niki.ai, ECom Express, MPL have been a handful of of the notable portfolio organizations of Indian micro VCs in the previous.
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“The Micro VC stage of investments with a smaller fund size is the highest risk capital asset class that is supporting India’s next-gen innovation driven entrepreneurs. Several smaller funds that started a decade ago have not only enabled an established Startup-VC ecosystem that we witness today, but have also outgrown themselves, supporting their early bets in later rounds as well,” mentioned Rajat Tandon, President, IVCA.
Investors such as Helion Venture Partners, which had place $800k in Flipkart back in 2008, earned 16.7x returns on its exit from the Walmart-owned firm. Others which includes Orios secured about a whopping 375x returns on its 2011 angel investment of $156k in Ola whilst DSG Consumer Partners witnessed about 6x returns on its $1.25 million investment in OYO back in 2014, according to the report titled Micro VC Funds in India: Emerging Players in Indian Startup Funding Landscape.