'Being a Value-Added Partner to Founders and Making Investments With a Long-Term Perspective are Important': B Capital's Karan Mohla India is a strong market overall, and B Capital General Partner Karan Mohla anticipates that growth will continue to pick up speed despite the current economic climate. He thinks that being a value-added partner to their founders and investing with the long term in mind are important.

Early-stage VC firms' optimism is reasonable given the state of the funding market. According to a recent research by PwC on funding trends in India, early-stage deals accounted for 57% of the overall capital in H1 CY23 (in volume terms).

Each deal had an average ticket size of USD 4 million. Early-stage agreements made up roughly 16% of all fundraising in value terms in the first half of 2023, as per the report.

Compared to the same period in 2022, total funding in the first half of 2023 was $5.5 billion, a 72% decrease.

The overall fundraising trend for startups in India has slowed down, but venture capital firms are still raising sizable amounts of money this year. The sum of the venture capital dry powder raised so far in 2023 is a staggering $3 billion.

"Given the amount of funds available, deployment will rise because there is always a lag between fundraising and investing; we only need to adjust to a slower pace than in 2020–21. High-quality and sustainable business models will continue to draw investment, but we must work together to create long-lasting businesses," says B Capital General Partner Karan Mohla.

B Capital announced the USD 250 million closing of Ascent Fund II, its first specific early-stage fund, in July 2022. With a focus on the US and Asia, including Southeast Asia and India, the investment firm invests through the fund in pre-seed and early Series B rounds across the globe.

"Among other expanding industries, we invest in the next wave of innovation in digital healthcare, business software, finance, and logistics. According to Mohla, "These sectors are growing as technology is being utilized throughout the region, in part driven by the impact of the pandemic, and we remain dedicated to building the Economy of the Future."

The latest investments

A few companies in India, including Accacia (USD 2.5 million Seed funding in December 2022), Bhanzu (USD 15 million Series A funding in September 2022), and Turno (USD 10 million Series A funding in January 2023), as well as a few other investments in SE-Asia, have received funding as part of Ascent Fund II.

Mohla says, "While we do not disclose specific allocation by country or region, we are typically well-distributed between the US, India, and Southeast Asia, and we will continue to invest in exceptional teams and technologies that have the potential to develop into global companies and transform established industries."

Other milestones, B Capital has enjoyed include the close of the Growth Fund III (USD 2.1 billion) in January earlier this year as well as the Healthcare Fund I (USD 500 million) in March. With these fund closures, the firm's total assets under management are over US $6 billion.

The star investments

Mohla lists three of his standout investments and reasons why he backed them.

B Capital took part in Bhanzu's Series A fundraising last year because he thinks that CEO Neelakantha Bhanu is addressing a significant issue that children confront and that Bhanzu is enabling every child to have a great time learning maths.

"We invested in Bhanzu with the goal of revolutionising global math learning through its story narratives, with a particular emphasis on utilising data and technology. We have been impressed by Bhanu's clarity of vision in putting the customer first and developing a brand since the first time we met him, both of which are essential elements in creating a successful and long-lasting edtech company," he adds.

Additionally, the VC firm is committed to ensuring a sustainable future for everyone, and its investment in Accacia marks the start of its initiatives to support business owners who are working to achieve this objective. As per Mohla, the construction and operation of buildings results in almost 40% of all energy-related carbon emissions worldwide. Governments and regulators have taken notice of this and have increased the requirements placed on the real estate industry to reduce carbon emissions through ongoing monitoring and reporting. Traditionally, this duty to periodically assess and report carbon emissions for corporations has been placed on ESG experts.

An AI SaaS platform like Accacia is anticipated to play an increasingly significant role in the coming decade because of the strong carbon reduction targets, he states.

Mohla has invested in 20 companies before joining B Capital in 2022, the most of them in their early stages and a few in their growing stage.

"One that I would highlight in particular is FirstCry, which is today India's leading retailer in the baby and maternity wear category. This was my first investment. The process of collaborating with them starting in early 2012 taught me so much as an investor. It was founded by Supam Maheswari and Amitava Saha (who later founded Xpressbees as a spin-off from FirstCry). FirstCry has built an enduring platform with so many innovations that were new to the Indian market, from building offline retail (a first in the Indian ecommerce market) to an internal logistics network and full-stack content-community-commerce model," he shares.

Investment thesis

B Capital's basic strategy is to invest consistently, be an engaged partner, and provide its portfolio companies with access to worldwide resources to aid in their growth.

"In particular, we have made significant investments in India over the years, and we will keep doing so. At the early-stage, rather than calling it a winter, I would describe it as a normalisation of funding and a return to the basics. While there is macroeconomic uncertainty in many respects, innovation will produce substantial returns and results during these times," says Mohla.

Additionally, he believes that India is a strong market overall and that growth would continue to pick up speed despite the current economic climate. "At B Capital, we think that being a value-added partner to our founders and investing with a long-term perspective are important."

Future outlook

Mohla anticipates that fundraising will remain difficult over the next twelve months. Founders will need to take a disciplined and balanced approach to starting and growing their businesses.

"Continued focus on building high-quality, sustainable enterprises will help founders get through this trying time. This cautious approach ought to support companies in surviving and turning the cycle in their favour," he emphasises.