Rise of micro VC funding in India as investors focus on early-stage investment

By Staff Writer

Feb 19, 2016 05:10 AM EST

The micro venture capital (VC) funding in India is gaining momentum as investors' focus on early-stage investment is increasing. A number of new breed venture capitalists are increasing investments in Indian startups. If an idea proves to be commercially successful, then it'll generate about 20-30 folds of growth in returns.

Many micro venture capital funds are turning keen on the Indian market. The latest trend indicates the new breed of venture capitalists entering the market with a focus on early-stage investment. These new micro venture capital investors are considered to be second coming of seed (early stage investment) capital in India.

The Economic Times reports that a Bengaluru-based consulting firm Kroc Flint & Candler has launched a INR 100-crore (1crore= 10 million) under Utilis Capital Advisors. The fund which focuses on startups has selected about 25 technology fledging businesses.

Utilis Capital will invest $100,000 to $200,000 (INR 70 lakh to INR 1.4 crore) to each startup. It has roped in 20 professionals with varied domain knowledge and experience in early-stage investment deals. 

Manishh Anand, Chairman at Kroc Flint & Candler, said "Most bigger (venture capital funds) have very small investing teams and that limits their domain knowledge. In early-stage investing you need to know a very wide range of domains."

Several micro venture funds such as Utilis, Unicorn Ventures and Endiya Partners are extending financial support to startups in a crucial need. The micro venture capital funding is considered to be the first institutional investment in a startup ahead of the commercialization stage of the product. 

LiveMint further adds that micro venture capital funds are here to stay considering the experience and proximity of entrepreneurs and venture capitalists. Early this week, Mukul Singhal and Rohit Jain duo led seed investment round in Gurgaon-based venture capital firm SAIF Partners. They target 20 seed stage startups over next one year. They have earmarked $500,000 corpus fund for investing in early-stage funding in startups. The valuations in venture capital market started to correct, while mainstream investment firms continue to run their seed funding. 

The micro venture capital funding helps entrepreneurs grow their ideas through startups into viable business models. Though the risk is high, the returns too will be higher as it'll yield typically 20-30 times the investment. 

Venture Capital funds have been treading into the micro venture investing segment. Another VC firm Seedfund is investing aggressively with its maiden fund of $15 million. Seedfund is an early investor in bus aggregator redBus. About 12 micro venture capital funds are operating in the Indian market, according to The Times of India

With a new breed of investors, Utilis is rushing in micro venture capital funding. It has corpuses of $15 million to $25 million and cutting cheques of $100,000 to $250,000. These amounts are typically smaller than the startup investments by regular venture capital firms. However, these micro venture capital investments are considered to be larger when compared with that of wealthy individuals or angel investors. 

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