Micro VCs Bloom In India; Invests $341 Mn In 566 Startups In 3 Yrs: Report
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Micro venture capitals have been one of the many reasons behind India’s growing and booming startup ecosystem in the world. Micro venture capitals or micro VCs are defined as VC which have investments under $30 million. As per a report, micro VCs have pumped in $ 341 million in the Indian startup ecosystem through 730 deals across 566 startups in the past three years.
The report co-authored by Indian Private Equity and Venture Capital Association (IPVA) and Amazon Web Services, along with Praxis Global Alliance highlights that micro VCs in the past decade have emerged as promising players in the country’s startup investor landscape, providing risk capital as well as providing mentorship to their portfolio companies. These micro VCs are allocating risk capital as startups seek to achieve product market fit and become ready to scale with stable business models.
As per the report, micro VCs are filling the funding gap present between institutional and angel investors and surging domestic LP interest in startups. The number of micro VCs rose to 88 funds in 2020 from just 29 in 2014.
The report based on the responses from 50 micro VCs claimed that high risk, high return seed cheques have yielded fantastic returns and have supported multiple unicorns at an early stage thus highlighting the rationale and need for early stage investing. Micro VCs typically invest in sunrise sectors with 60 per cent of micro VC investment in 2020 infused to SaaS/AI sector, consumer apps and platforms, ecommerce and listing platforms, whereas 52 per cent are sector agnostic. Micro VCs mostly focus in verticals such as SaaS/AI, BFSI, healthcare and life sciences.
Source(s): Micro – VC survey (N = 46), Tracxn, Praxis analysis
Commenting on the launch, Rajat Tandon, president, IVCA, said : "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. Some of those startup founders have grown to become Angel/VC investors or Limited Partners (investors in VC funds) themselves. Such is the compounding effect and importance of Micro VC funds, through this report we are celebrating and bringing these young and/or first time fund managers mainstream."
Madhur Singhal, managing director, Praxis Global Alliance said, “Micro-VCs are playing a crucial role in the Indian startup ecosystem, making contrarian bets and supporting untested ideas. This report is one of the firsts at recognizing the contribution of these micro-VCs and exploring the evolution of this segment, their investment thesis and success stories."