The early-stage venture funding scene is seeing more action in India. With SAP Ventures, Google and a clutch of others looking at investing in early-stage firms and VC funds, the landscape for entrepreneurship looks exciting.
One more such fund, Seedfund, an early-stage venture capital fund founded by Pravin Gandhi, is looking to raise its second fund with a corpus of $30 million. Gandhi was earlier with Infinity Ventures, which had funded IndiaGames and IndiaBulls.
Seedfund's investors include Google, Reliance ADA Group, Motorola and billion dollar US VC funds like Sierra Ventures and Mayfield. Seedfund looks to invest around Rs 1-5 crore in each firm.
Seedfund's first fund with a corpus of $15 million has almost been invested fully and industry sources indicate that the fund managers have sounded out that they are looking at a second fund. Bharati Jacob, partner, Seedfund, said it is too early to comment on their second fund.
Seedfund's focus is on investing in companies that can "significantly change the Indian and global markets through innovations in media, mobile, internet, retail and consumer-facing businesses." The first fund has made investments in around 10 companies including agencyfaqs.com and redbus.in.
Seedfund's move to raise its next fund comes close on the heels of another early stage VC fund Erasmic also looking at a $30 million fund. Venture capitalists invested some $928 million in 80 deals for entrepreneurial companies in India during 2007, according to Dow Jones VentureSource.
This was a whopping 166 per cent increase over the $349 million invested in 36 deals in 2006.
The report added that nearly 48 per cent of all venture financing deals in India were for information technology companies, as 38 rounds were completed, accounting for $384 million, over India's entire 2006 venture investment total.
The most popular recipients of venture capital in the IT industry were companies in the web-heavy "information services" sector, which accounted for 22 deals and nearly $141 million in investment. Among the deals in this area was the $10 million second round for Bangalore-based Four Interactive, an online provider of local information on food, events, lifestyle, shopping and more, and it is this segment which Seedfund is focussing on.
"Service-oriented companies in India - both from technology and non-technology areas of hotels, taxis and similar services - continue to attract investment and this is likely due to their low capital requirements as well as to the rapidly emerging nature of the broader Indian economy," the report said.
"It takes relatively little money and little time for these kinds of companies to begin generating revenues and, because of this, web-related and consumer and business services companies accounted for over half of all the venture capital deals done in India in 2007."
"This is only the beginning for the venture capital market in India," noted the report. "In 2007, 79 per cent of all deals in India were for seed and first rounds, and a lot of these companies will continue raising venture capital as they progress toward profitability and liquidity. And because the majority of investment is going to early-stage companies, we aren't seeing ballooning of deal sizes like those in the US and Europe where investors are focussed more on later-stage companies."
