Sunday, February 28, 2016

Micro Venture Capital Funds in India

Micro venture capital consists of smaller seed investments, typically between $25K to $500K, in companies just started.  In the United States MVCs have become an important source of finance for startup companies.

Though there is a high probability that the majority of the startups will not survive long enough to reach a Series A round of funding, micro venture capital firms are willing to make the investment  because they believe that it requires only a few successful companies for them to see profitable returns.

In the United States, there are over 236 micro venture capital firms. Interesting examples of MVC investing include SV Angel, which had invested in Dropbox  and Lowercase Capital which had invested in Uber.

Indian Scene

Manishh Anand, chairman at Kroc Flint & Candler, a Bengaluru-based consulting firm focused on startups, recently launched a Rs 100-crore fund called Utilis Capital Advisors. It will invest about Rs 70 lakh to Rs 1.4 crore) each in about 25 technology startups.

Utilis is a micro venture capital fund willing to  cut cheques of $100,000 to $250,000— smaller than the startup investments by regular venture capital firms.

Micro venture funds like Utilis, Unicorn Ventures and Endiya Partners meet a crucial need, making the first institutional investment in a startup.

Some VC funds, too, have been treading into the micro venture investing space, Some  traditional early-stage, or seed-stage, investors such as Blume Ventures and Kae Capital are also entering micro fund stage.

In January, Sateesh Andra, former managing partner at Ventureast, launched Endiya Partners along with Ramesh Byrapaneni and Abhishek Srivastava, who were also from Ventureast.

Endiya, which has invested in foodtech startup Innerchef and analytics firm Hansel, has raised $15 million and expects to double its fund size this year.

Angel investments, or startup investments in India by wealthy individuals, leaped to 673 deals in 2015 from 360 in the year before.

 Mukul Singhal and Rohit Jain, the duo that led seed investments at Gurgaon-based venture capital firm SAIF Partners are into micro  micro venture capital.

Singhal and Jain,  aim to build a portfolio of up to 20 seed stage start-ups over a year.

Singhal, also a fairly prolific angel investor in his personal capacity.

Mumbai-based Unicorn India Ventures, co-founded by Anil Joshi, former president of angel investor group Mumbai Angels, garnered $6 million in the first close of its $22 million (Rs.150 crore) debut fund.

It aims to invest up to $200,000 in technology start-ups and has just announced its first investment in on-demand cab aggregator Roder.

Venture Catalysts, Mumbai,  is raising a Rs.100 crore (about $15 million) seed fund that will support its start-up incubation services.

A former Seedfund executive director Anand Lunia started  India Quotient more than four years ago. Lunia,

Investing at the seed stage has been done by mainstream venture capital firms such as SAIF, Sequoia Capital, Matrix Partners, Nexus Venture Partners and Helion Venture Partners also.

The existence of a robust micro venture capital industry is important and  necessary.

Orios Venture Partners, founded by prolific Mumbai-based angel investor Rehan Yar Khan, shifted gears. Compared to its $50 million debut fund which was targeted at seed-stage start-ups, it is now raising a $150 million fund that will invest across stages.

Bengaluru-based AngelPrime, backed by Palo Alto, California-based Social+Capital Partnership among others, rebranded itself as Prime Venture Partners when it raised a Rs.300 crore (about $47 million) second fund. It will continue to fund companies at the seed stage but will also participate in later, notably Series A rounds.

Blume Ventures, which is raising a $60 million second fund, was one of the most prolific seed-stage investors in the country about three years ago. In its new fund, however, up to 70% of the corpus will be reserved for later-stage funding rounds.

More information

7 Seed-Stage Funding Sources That Might Finance Your Startup
Veteran startup mentor, executive, blogger, author, tech professional, and Angel investor.
SEPTEMBER 25, 2015

HeadStart Ventures on road to create Rs 25 cr Angel Fund
Jun 28, 2010

Issues Related to Promoting Micro Venture Capital

The “New” Venture Capital Cycle and the Role of Governments: The Emergence of Collaborative Funding Models and Platforms
J.A. McCahery, E.P.M. Vermeulen
DSF Policy Paper, No. 43

Start-up finance The role of Micro Funds in the financing of new technology-based firms
NESTA 2009 Report

Micro Funds are increasingly prominent players in the early stage equity investment
environment, a prominence reflecting increasing government sponsorship. This research
seeks to characterise the Micro Fund investment experience for both fund and portfolio
firms by addressing the following research questions:
1. What is the Micro Fund investment model?
2. What has been the experience of the new technology-based firms?
3. What role does Micro Fund investing play in their financial pathways and why?
4. Is government sponsorship of these funds a suitable method of new technology-based
firm support?
Below we summarise the results of our research and our policy recommendations. Whilst the
development of precise policy instruments was beyond the scope of this study, we identify
below what those instruments should be designed to achieve.
Definition of Micro Funds
Micro Funds are small venture capital funds worth £30 million in total or less, investing
less than £2 million in total (including follow-up investments) into each of their portfolio

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