$4.5 billion in new venture capital funds awaiting deployment to Indian start-ups

Even as venture finance shows signs of slowing in the Indian startup ecosystem, several global investment firms have made more than $4.5 billion in new pledges to the sector – albeit mostly for early stage deals.

In recent months, prominent venture capital firms — Sequoia, Axel, Matrix and Lightspeed, among others — have announced new fundraising with a particular focus on early stage investments in India, although it remains to be seen when the VC will launch. This new money is flowing.

Besides these global companies, local entities have raised new funds or are in the process of raising new funds for early stage investments.

In 2021, the Indian startup ecosystem raised a record $38.5 billion. But this year has seen a shift in momentum, particularly in the April-June quarter, largely driven by global factors, with May seeing $1.85 billion in investment, the lowest in any month this year.

Usually, when one goes through this environment, new sectors begin to appear and some green shoots appear. That’s what we’re excited about,” says Venky Harinarayan, partner at Rocketship.vc, which earlier this month raised $125 million in the first closing of its third fund.

The Silicon Valley-based venture capital firm, which has backed nearly two dozen local startups including NoBroker, Khatabook and Jar, has not disclosed how much capital from its new fund it will deploy in India.

according to YourStory ResearchIndian startups raised $17.1 billion across 891 deals between January and June, which is 82.8 percent more than in the first half of 2021. However, it is important to look at the continuing numbers in the second half of 2021, when it amounted to $22.7 billion invested Through 865 transactions.

In addition, most of the deals announced in the first half of this year will likely have been drafted and acted on at least two months in advance, and the real slowdown will begin to emerge in the second half of the year.

But the level of confidence is still very high among the enterprising investors who are keen to continue betting on Indian startups.

Sequoia accounts for the majority of the new capital raised for Indian start-ups this year. Sequoia India and Sequoia Southeast Asia combined have raised $2.85 billion across a range of funds, including Indian Growth and Investment Funds, and the $850 million Southeast Asia Fund.

“This fundraising, which comes at a time when markets are starting to cool off after a very long bull run, indicates our deep commitment to the region and the faith our limited partners have in the long-term story of India and Southeast Asia,” the VC said in its blog post.

In addition to the new capital raised for India, many have increased the amount of their money. Accel announced a seventh fund of $650 million in March. In contrast, her sixth fund was $550 million.

Also, the slowdown did not have a profound impact on early stage startups.

As told by Rema Subramanian, co-founder of Ankur Capital your story In a previous interview, “there is a greater slowdown in the growth phase and not in the first category.”

She added that the potential for returns from early stage investments is very high.

The biggest impact will be on investments in the later stage, with larger private equity funds such as Tiger Global and SoftBank, slowing due to losses in the fiscal year ending in March. These are usually in Series C and beyond funding stages.

However, many reports indicate that Tiger Global has started investing in early-stage startups, particularly in the Series A and B levels. In fact, earlier this year, the company made its first seed investment in Shopflo , a software-as-a-service, or SaaS, startup company.

Amid all this, other venture capital firms – both local ventures and cross-border entities – have announced plans to raise separate funds for India. These projects include Eight Roads Ventures, IvyCap Ventures, Jungle Ventures, Athera Ventures and Ganesha.

Global venture capitals have also committed more resources to India across sectors such as fintech, edtech, B2B, SaaS, crypto, blockchain and agritech.

Given the current environment, the focus will be on finding new areas to invest in. As one venture capitalist puts it, “Secular trends around India are still very strong.”

Industry participants believe now is the time to invest as there is less noise in the ecosystem and more clarity about which companies to put their money into.

“We’re in a period of transition, although it’s hard to say where it’s going to settle,” says Rocketship’s Finky.

Edited by Sahili Sen Gupta