These Newly Launched Early-Stage Funds Aim to Support Indian Startups in a Funding Crunch

India-focused funds are gaining traction at a time when the funding winter is getting worse, an indication of a developing ecosystem and strong investor interest in the area. Following V3 Ventures, Early Spring, BoldCap Fund, Pi Ventures and Capria Ventures, 3one4 Capital is the fifth fund to declare the final close in Q2 2023 to support the world’s third-largest startup ecosystem at early-stage.

According to Pranav Pai, Founding Partner and Chief Investment Officer of 3one4 Capital, the venture capital firm, which has invested in unicorns including Open, Darwinbox, and Licious, had its Fund IV oversubscribed by $250 million but decided to maintain it at its initial size of $200 million. The VC asserts that two and a half months after the fund’s inception, it was able to close. Over five deals have already been approved or invested in since the first close of Fund IV was completed in March 2023.

With only USD 2.4 billion entering the ecosystem in the first four months of 2023, compared to USD 14 billion in 2022 and USD 11 billion in 2021, venture capital flowing into India’s tech businesses has reached its lowest level in the previous two years, as per market analytics platform Venture Intelligence. With 93 signed agreements, followed by 60 deals for Series A, among other transactions, early-stage companies became the darlings of investors.

With the closure of its IV fund, 3one4 Capital plans to continue its early-stage strategy, focusing on sectors such as consumer internet, SaaS, fintech, and enterprise & SMB digitisation, while increasing investments in newer areas such as digital health, climate tech, and more. The firm aims to invest in early-stage startups with larger cheque sizes, ranging from pre-seed to Series A, with cheques between USD 0.5 million to USD 5 million. The median cheque size for these investments will be in the USD 1.5 million to USD 3 million range, and the firm will also be looking at post-seed and pre-Series A funding rounds.

Indian startup founders have many options for funding, but Arjun Vaidya, Co-founder and Investment Partner at V3 Ventures believed that “What matters most is having investors on your side who recognise the difficulties in creating well-known, consumer brands. V3 has considerable experience creating startups from the ground up. We would like to provide this unique value.”

Early-stage VC V3 Ventures revealed its plans in April to invest over INR 900 crore in digital and consumer startups with operations in Europe, the US, and India last month.

Godrej Consumer Products (GCPL) also plans to use its knowledge of the consumer market and lessons learned over the years to support early-stage startups in India that are focused on establishing a strong offline as well as online presence by providing unique products. GCPL invested INR 100 crore in Early Spring, a venture launched by Spring Marketing Capital, in April.

The new fund would put up to INR 5-20 crore in seed and pre-Series A funding rounds with a capital of INR 300 crore.

According to BoldCap Founder and General Partner Sathya Nellore, “We will see a lot more SaaS companies for the world being built from India.” Indian entrepreneurs are reportedly thinking bolder and more worldwide. BoldCap announced a second fund in April for USD 25 million to support the same, with investments expected for 15 to 20 early-stage SaaS companies in the country during the next 24 to 36 months.

With the help of its second fund, Pi Ventures is likewise dedicated to assisting brilliant businesspeople who are developing game-changing products that use cutting-edge technology to address pressing issues in the real world. The Fund of Funds for Startups (FFS) of SIDBI provided the early-stage VC with around USD 12.2 million, or 15% of the fund’s total capital (USD 83 million), in April. In March, Colruyt Group India contributed INR 22 crore ($2.6 million) to the fund.

Nearly 60% of the new fund will also be invested by the international venture capital firm Capria Ventures in India and Southeast Asia. In order to focus on investing 20 to 25 innovative entrepreneurs, it just celebrated the first close of its USD 100 million fund.

On one hand, investments are falling month over month, while on the other, an increasing number of funds, particularly early-stage venture capital, are closing their funds to support entrepreneurs. Let’s wait and watch how the ecosystem develops over time.