VCs set out to raise fresh capital in India

BENGALURU: Early-stage technology and startup deal activity is set to intensify further with venture capital firms such as Accel Partners and …
BENGALURU: Early-stage technology and startup deal activity is set to intensify further with venture capital firms such as Accel Partners and Lightspeed Venture Partners expected to raise fresh capital and several other funds, both old and new, stepping up investments in the country.

Apart from the bigger and better known VCs, a group of funds from the United States, Japan, South Korea and China, which were looking at India from the sidelines, are now co-investing with the larger funds. These include General Catalyst, Akatsuki Entertainment Technology, Korean Investment Partners, Qiming Ventures, Morningside and and a clutch of family offices. Others such as Steadview Capital, Falcon Edge, Shunwei Capital, Ribbit Capital, Venture Highway, Mirae Asset Management and Beenext have also stepped up deal volumes significantly.

Accel, an investor in unicorns Flipkart, Swiggy and Freshworks, is expected to hit the road to raise $500 million later this year, while Sequoia Capital has extended its $695 million sixth India and Southeast Asia fund by $200 million, said sources. Sequoia, the Silicon Valley heavyweight, is also closing a $200 million fund for its seed-stage programme, Surge, which ET first reported on April 3.

Others in the fundraising process include Chiratae Venture Partners (formerly IDG Venture Partners), which plans to raise about $300 million; Lightspeed Venture Partners, which is targeting about $200-250 million, and Kalaari Venture Partners, which said earlier this year that it looks to raise $200 million.

Emailed query sent to Accel Partners, Sequoia Capital and Lightspeed did not elicit a response till press time on Monday. The Mumbai-based India Quotient also said recently that it will close its $60 million fund by September, while Water-Bridge Ventures has begun the process to raise its second fund.

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Heightened Interest

Apart from these, there are close to a dozen seed and series A focused funds that collectively plan to raise anywhere between $300 and $350 million, as per industry estimates.

The heightened interest comes at a time when the Indian startup ecosystem has seen a bunch of secondary exits and rising valuations, investors and other industry stakeholders told ET. A stable government and strong macro-economic fundamentals also have a role to play, they said.

According to startup industry tracker Tracxn, the money poured into Indian startups increased by 30% to $4.7 billion in the first six months of 2019, compared to the same period last year.

“With each cycle, the early-stage VC ecosystem is getting larger in terms of number of funds. Even with a generalist early-stage tech fund like ours, the team members are getting more specialised in the sectoral thesis that they track and invest into,” said Karthik Reddy, co-founder, Blume Ventures. Blume is set to close its $80-million third fund later this year.

One immediate effect of these big corpuses is that founders are skipping angel rounds and opting to raise larger first cheques, averaging over $1.2 million, from institutional investors, data sourced from Tracxn shows.

Funds typically raise money from Limited Partners (LPs), which include endowments and pension funds, sovereign funds, corporates, fund of funds, family offices and high net-worth individuals. LPs, who are sponsors in funds globally, have been actively looking at attractive secondary exits and improved paper valuations.

Funds are also approaching LPs earlier than planned due to the fear of a market downturn and uncertainty around elections in the United States next year, along with the fact that venture capital investments in China are slowing.

“LPs (both foreign and domestic) are now warming up to the Indian VC asset class, buoyed by return of capital from recent exits and the overall optimistic view that the Indian VC story is finally becoming real,” said Sarbvir Singh, managing partner at WaterBridge Ventures.

Last month, ET reported that funds were set to mop up more than $2.5 billion as they sell a portion of their stakes in companies such as Oyo, Byju’s, PolicyBazaar, BookMyShow, Freshworks, Lenskart, Delhivery and Swiggy to investors including Tencent, General Atlantic, Soft-Bank, Temasek and Hillhouse, among others.

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Bullish on India, VCs set out to raise fresh capital

These include General Catalyst, Akatsuki Entertainment Technology, Korean Investment Partners, Qiming Ventures, Morningside and and a clutch of …
Bullish on India, VCs set out to raise fresh capital
Early-stage technology and startup deal activity is set to intensify further with venture capital firms such as Accel Partners and Lightspeed Venture Partners expected to raise fresh capital and several other funds, both old and new, stepping up investments in the country.

Apart from the bigger and better known VCs, a group of funds from the United States, Japan, South Korea and China, which were looking at India from the sidelines, are now co-investing with the larger funds. These include General Catalyst, Akatsuki Entertainment Technology, Korean Investment Partners, Qiming Ventures, Morningside and and a clutch of family offices. Others such as Steadview Capital, Falcon Edge, Shunwei Capital, Ribbit Capital, Venture Highway, Mirae Asset Management and Beenext have also stepped up deal volumes significantly.

Accel, an investor in unicorns Flipkart, Swiggy and Freshworks, is expected to hit the road to raise $500 million later this year, while Sequoia Capital has extended its $695 million sixth India and Southeast Asia fund by $200 million, said sources. Sequoia, the Silicon Valley heavyweight, is also closing a $200 million fund for its seed-stage programme, Surge, which ET first reported on April 3.

Others in the fundraising process include Chiratae Venture Partners (formerly IDG Venture Partners), which plans to raise about $300 million; Lightspeed Venture Partners, which is targeting about $200-250 million, and Kalaari Venture Partners, which said earlier this year that it looks to raise $200 million.

Emailed query sent to Accel Partners, Sequoia Capital and Lightspeed did not elicit a response till press time on Monday.

The Mumbai-based India Quotient also said recently that it will close its $60 million fund by September, while WaterBridge Ventures has begun the process to raise its second fund.

Apart from these, there are close to a dozen seed and series A focused funds that collectively plan to raise anywhere between $300 and $350 million, as per industry estimates.

Read: Top VCs ready big cheques for proven operators

The heightened interest comes at a time when the Indian startup ecosystem has seen a bunch of secondary exits and rising valuations, investors and other industry stakeholders told ET. A stable government and strong macro-economic fundamentals also have a role to play, they said.

According to startup industry tracker Tracxn, the money poured into Indian startups increased by 30% to $4.7 billion in the first six months of 2019, compared to the same period last year.

“With each cycle, the early-stage VC ecosystem is getting larger in terms of number of funds. Even with a generalist early-stage tech fund like ours, the team members are getting more specialised in the sectoral thesis that they track and invest into,” said Karthik Reddy, co-founder, Blume Ventures. Blume is set to close its $80-million third fund later this year.

One immediate effect of these big corpuses is that founders are skipping angel rounds and opting to raise larger first cheques, averaging over $1.2 million, from institutional investors, data sourced from Tracxn shows.

Funds typically raise money from Limited Partners (LPs), which include endowments and pension funds, sovereign funds, corporates, fund of funds, family offices and high net-worth individuals. LPs, who are sponsors in funds globally, have been actively looking at attractive secondary exits and improved paper valuations.

Funds are also approaching LPs earlier than planned due to the fear of a market downturn and uncertainty around elections in the United States next year, along with the fact that venture capital investments in China are slowing.

“LPs (both foreign and domestic) are now warming up to the Indian VC asset class, buoyed by return of capital from recent exits and the overall optimistic view that the Indian VC story is finally becoming real,” said Sarbvir Singh, managing partner at WaterBridge Ventures.

Last month, ET reported that funds were set to mop up more than $2.5 billion as they sell a portion of their stakes in companies such as Oyo, Byju’s, PolicyBazaar, BookMyShow, Freshworks, Lenskart, Delhivery and Swiggy to investors including Tencent, General Atlantic, SoftBank, Temasek and Hillhouse, among others.

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Fintech Debt Investors Follow Equity Dollars Into Latin America

Venture capital heavyweights including Softbank, Andreessen Horowitz and Sequoia Capital have boosted their equity investments in the region over …

By Diana Asatryan and Vaidik Trivedi

Fintech firms in Latin America are having a moment with the equity investing titans of the world, and debt investors are taking note.

Venture capital heavyweights including Softbank, Andreessen Horowitz and Sequoia Capital have boosted their equity investments in the region over the past six to 12 months, according to multiple industry sources. Strong equity backing, in turn, is attracting debt capital.

“We can’t really scale a debt investment unless the startups are well-funded” to protect investors from first-dollar loss, said Gordon Watson, a partner at Victory Park Capital, a fintech investor. “They need to be able to raise large equity lines in order to get large debt.”

Finance and Money Transaction Technology Concept. Icon Graphic interface showing fintech trade exchange, profit statistics analysis and market analyst service in modern computer application.

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In the past year and a half fintech startups in the region have attracted increasing volumes of global venture capital dollars. Venture capital investments in LatAm startups quadrupled to a record $2 billion in 2018 from $500 million in 2016, according to an annual review by the Association for Private Capital Investment in Latin America (LAVCA). Fintech firms captured nearly 25% of those investments.

“What we are seeing in, say, Mexico … is very different from a few years ago,” said James Sagan, managing partner at fintech investor Arc Labs. “So much has changed so quickly.”

While 2018 was a record investment year, the trend has accelerated this year. In March, SoftBank, the Japanese conglomerate, launched a $5 billion fund devoted solely to tech investments in LatAm companies, including fintechs.

“Something like that is really a game changer for companies, because they are going to have access to $500 million checks,” Watson said. “That wasn’t really something that existed a couple of years ago, most of the venture capital [rounds] were smaller.”

Victory Park, which has been an active debt investor in the online lending sector in the US, entered the LatAm market a few years ago, according to Watson. The firm is primarily investing in Mexican companies, but has plans to expand to Brazil and Colombia.

Because there is less investing competition in Latin America than in the US, debt providers are still able to snag double digit returns investing in online consumer and SME (small-to-medium enterprise) lenders, according to both Watson and Sagan. That’s compared to 6%-7% returns from similar investments in US lenders. Sagan’s Arc Labs — which recently pivoted to primarily investing in LatAm fintechs — is close to closing on three or four debt deals in Mexico, and one more in Brazil.

With a fresh supply of capital, LatAm startups, in turn, are rushing to launch new products, expand their geographic reach and raise additional debt and equity rounds. Brazil’s online lender Creditas, for instance, plans to expand into Mexico by year-end, according to CEO Miguel Rodrigues. Creditas, like many other fintechs in the region, targets the underbanked population that has limited or no access to credit.

“In Mexico … 80% don’t have a credit card and 60% of people don’t have a bank account,” said Adalberto Flores, CEO of online consumer lender Kueski. “Credit access in Mexico is very difficult and we are trying to build a digital financial ecosystem around the Mexican consumer for easier availability of credit.”

The lender is on the lookout for a Series B equity funding round to expand its platform to other LatAm countries, Flores said.

Another fintech lender, Mexico’s Prestadero, plans to raise $5 million in equity and “some debt capital” by early next year to offer additional products, according to CEO Gerardo Obregón.

All three CEOs report increased interest from US-based debt investors, including large US investment banks, in recent months.

“US investment banks are spending a lot of time in the region … and seem more interested in LatAm deals today than in US deals,” Watson said.

Goldman Sachs, for instance, has reportedly directed its special situations group to keep a close eye on the region after its successful debt investment in Brazil’s digital bank Nubank, Watson said. “Other investment banks are following Goldman’s suit,” Watson said.

A Goldman Sachs spokesperson confirmed that the firm is actively investing in and seeking investments in fintechs in Latin America.

Diana Asatryan covers specialty finance and fintech for Debtwire and is based in New York. She can be reached at diana.asatryan@acuris.com. Vaidik Trivedi is an editorial intern with Debtwire. He can be reached at vaidik.trivedi@acuris.com.

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Rupeek raises $30 Mn round led by Bertelsmann India

… have been backed by marquee investors WestBridge Capital Partners, India Equity Partners, Baring Private Equity Asia, GIC and several others.

Online gold loan platform Rupeek has raked in $30 million funding round led by Bertelsmann India Investments.

The funding round, which reportedly will be completed in two tranches, witnessed the participation of existing investors Accel and Sequoia India. The company will deploy funds for product development and expand across new markets.

Before, the company had raised $12 million from Accel India, and financial inclusion focused investment firm Lok Capital in 2017. Founded in 2015, the company provides personalized support, on-demand pickup and return of the valuables on gold products.

Sequoia also invested $2 million in the company in 2017. Besides, it had raised capital from angels such as Anand Chandrasekaran, Anupam Mittal, Kunal Shah and Ravi Garikipati.

This Bengaluru-based entity claims to bring in transparency in the lending space and safeguard retail investor interest at all costs.

Rupeek has its centres from where the customer can pledge gold. The loan can be used for general purposes as well as for medical and other purposes. It accepts only gold jewellery and does not take gold coins or bars as a pledging asset.

Rupeek provides two programmes – Regular E-pay plus (monthly interest rate) and No Tension Plus (fixed interest rate). It’s also planning to use its proprietary hardware make absolute fairness, scalability and standardization in gold purity valuation.

Currently, the firm is operational in eight cities including Bengaluru, Delhi, Pune and Hyderabad.

At present, the gold-loan space is dominated by older NBFCs such as Muthoot Finance and Manappuram Finance, which have been backed by marquee investors WestBridge Capital Partners, India Equity Partners, Baring Private Equity Asia, GIC and several others.

Rupeek competes with the companies as mentioned above and a few others.

ET first reported this development.

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Menlo Ventures names former Summit exec Sanday as ninth partner

Menlo Ventures has brought in former Summit Partners exec JP Sanday to help invest the firm’s $500m Inflection Fund laun …

Menlo Ventures has brought in former Summit Partners exec JP Sanday to help invest the firm’s $500m Inflection Fund launched earlier this year.

Sanday become the ninth partner at Menlo, having previously been a vice president at Summit working on investments including Smartsheet, Ascentis, Teaching Strategies and Clearwater Analytics.

A statement from the firm said, “Adding a partner is a huge decision for the firm, and JP made it easy.

“His genuine and affable demeanor, combination of investing and operating skills, razor-sharp intellect, glowing founder references, and desire to focus on early growth (or inflection as we call it) investments, made him a terrific fit.”

Menlo has led three financings since launching its Inflection fund – Hover, Benchling and a third company the firm plans to announce “shortly”.

The fund is designed to invest in companies at their early breakout point between venture and late-stage growth, generally between $5m and $15m of ARR.

Menlo will invest $20m to $40m in situations “where a meaningful injection of capital, team building, introductions to early customers and partners, and a highly focused partnership will help accelerate them to scalable, hypergrowth”.

The firm also makes early-stage investments through its $450m Venture Fund.

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