https://telegram.me/TheHindu_Zone https://telegram.me/PDF4EXAMS Power of Ideas 21 WWW.ECONOMICTIMES.COM Home-coming for Venture Capital An increasing number of fund managers now look up to India’s home-grown Fund of Funds for venture capital, SIDBI, ushering in a silent revolution for an industry that has been largely dependent on foreign capital, says Taslima Khan

round June last year, entre- wherein they declare the size of the fund, preneur-turned-venture areas they would be investing in, time- capitalist Manish Singhal lines they will follow for investments, First-Time Fund Managers Backed by SIDBI in the was looking to raise his terms for managing the fund, and the Past One Year (From a Total of 17 Funds) first venture fund, and he returns they would expect. Proposals thought it was the toughest are then vetted by the Venture Capital PI VENTURES `192 crore UNICORN INDIA VENTURES task he had ever under- Investment Committee, or VCIC, which FUND I ` taken. Singhal had earlier co-founded includes Naukri Founder Sanjeev early-stage, deep-technology fund 100 crore fund focused on seed-, startupA financing platform Letsventure. Bhikchandani, IAN cofounder Saurabh focused on artifi cial intelligence, early-, and growth-stage companies in social As he searched far and wide for investors Srivastava, software lobby Nasscom’s machine learning and Internet of media, mobile, analytics & Cloud, IOT, and in his maiden fund, the Small Industries Kiran Karnik and Mohandas Pai, among Things. Has contributions from a fi ntech. Recently invested in microlending Development Bank of India, or SIDBI, others. SIDBI commits to invest about host of other investors, including startup SmartCoin Accel Partners, Mohandas Pai, came to his rescue, committing signifi- 15% to 25% of the fund corpus, post which STELLARIS FUND ` cant investments. fund managers have to secure commit- Binny Bansal, Deep Kalra, and 641 crore fund “The biggest comfort came from the fact ments from other entities, and SIDBI then others founded by former top executives at Helion that Sidbi trusted our ability quite early releases the funds. Ventures Partners. Focused on early- stage when we didn’t even have commitments Unlike the international connotation ANKUR CAPITAL `60 opportunities in consumer technology, from other investors, and were only at for fund of funds that have a closed life crore impact investor, focused online small and medium businesses (SMBs), a concept stage,” said Singhal, who is and a formal structure, SIDBI has majorly on innovative businesses in and ventures in the global software-as-a targeting to close his deep technology- been investing over the past two decades agriculture, healthcare, education, service space focused fund at `195 crore. He has com- from its balance-sheet and government skill development, and rural access. ENDIYA SEED Has investments in companies such mitments from several overseas and local contributions. CO-CREATION FUND ` high net-worth individuals (HNIs) and It plays fund of funds under various as Suma Agro and CropIn 175 crore funds, such as the early-stage Flipkart- heads: A `10,000-crore fund of funds spon- early-stage venture fund focused on backer Accel India. He adds, “We did not sored by the government and managed by MENTERRA SOCIAL startups in software as a service (SaaS), enterprise security, AI, VR, robotics, 3D go through the experience that SIDBI did SIDBI, the `2,000-crore India Aspiration IMPACT FUND I ` 40 crore Printing, and IoT not understand what we were doing.” Fund, launched in 2015 and investing in impact fund that invests in early- Singhal is not alone. First-time fund micro, small and medium enterprises, the stage social enterprises working OORJA CAPITAL manager Rema Subramanian, who runs `60 crore Aspire Fund that invests in agri $60 million consumer in the sectors of education, health, internet fund fl oated by former founding the `60 crore Ankur Capital, Stellaris businesses, and funds received through agriculture, and energy team at Seedfund Venture Partners, founded by former budgetary allocations. The institution Helion executives and counts Infosys as also manages `200 crore from the Life a limited partner, and seasoned players Insurance Corporation of India. such as Blume Ventures, Kae Capital and For several funds, commitments from To date, SIDBI has committed IDG Ventures are increasingly looking up a domestic institution help build cred- `3,521.29 crore to 125 funds, while to SIDBI, which has emerged as the home- ibility, and make drawing funds from grown fund of funds. other investors easier. “SIDBI investing disbursements of `1,273.26 crore The trend in capital sourcing marks a in a fund significantly increases the con- have been made to 82 funds silent revolution for the domestic venture fidence of all other investors worldwide,” SIDBI’s Steady Rise capital industry, which has hitherto been says Sudhir Sethi, Managing Director at majorly dependent on overseas cash. IDG Ventures which often likes to brand Funds Committed Funds Disbursed Number of Sanctions to funds “With external money, there is always itself as the ‘desi’ VC of India. a fluid situation. Sometimes, it is in one “It also gives sectoral comfort to inter- 11 19 37 economy, and sometimes it is funding national investors, given the fact that (`crore) another destination. Also, overseas inves- in sectors such tors end up bearing the currency risk as as agriculture, if 1400 much of their returns get eaten away due SIDBI commits there is an Indian to currency depreciation. Additionally, to invest about financial institution 1200 the flavour of investments keeps dan- 15% to 25 % willing to take the 1000 gling between the early and late stages, of the fund bet, then they are and across favourite sectors,” says Ajay corpus, post more than happy 800 Kumar Kapur, deputy managing director which fund to come in,” said 600 at SIDBI. managers Rema Subramanian, The rising interest in SIDBI as a source have to secure Managing Partner 400 of capital is evident in the increase in the commitments at Ankur Capital, number of sanctions and capital commit- from other which has raised 200 ` ments to fund managers in the last couple entities a 60 crore fund 0 of fiscal years. The number of sanctions focused on agritech, FY15 FY16 FY17 to funds rose to 37 in FY17 over 11 in FY15, health, and education with contribution and capital commitments in the last two from SIDBI. years have nearly quadrupled -- from To be sure, SIDBI usually doesn’t make `314.4 crore in FY 2015 to `1,202.5 crore the first commitment, and requires fund Why SIDBI’s Rise as a Sovereign Fund is a Game Changer in FY17. managers to get firm promises from other Reduces dependence on “The overall funding to startups from investors before they approach SIDBI. “It foreign capital that is cyclical SIDBI’S FUND-O-FUNDA the SIDBI-supported venture funds this depends on the quality of the team and ` year could be in the range of 3,000 to 4,000 market scenario, but if SIDBI makes the Improves fund managers’ crore. This is because most funds that got first commitment then that portion of the credibility among `10,000 crore sanctions last year are likely to achieve money is blocked before the fund man- international investors Fund of Funds for startups full closure this year,” says former ager goes around and gets commitment Infosys director TV Mohandas Pai, who is from others, so disbursement ends up tak- Is a boost for fi rst-time fund also a member of SIDBI’s Venture Capital ing more time,” said Harkesh Mittal, head managers with no track record `60 crore `2,000 crore Investment Committee. of the National Science and Technology Eventually will multiply fund Aspire Fund for India Aspiration Fund for micro, Raising a fund is a highly sensitive and Entrepreneurship Development Board pool to startups agri businesses small and medium enterprises grueling exercise for fund managers, at the Department of Science and and there are several reasons for native Technology. “SIDBI would usually take capital helping change the startup- about three to six months to consider a investment ecosystem in the country. sanction – and that is a fair pace.” Fund managers are discovering differ- Monetary returns from funds are still ent comfort zones in having a financial a mixed bag. “We call it the hockey stick We have It also gives sectoral backer at home. “You can invest while you curve. All taken together, we have been ILLUSTRATION: ANIRBAN BORA been able to comfort to international do the fund raising (at home), compared able to get returns in high single-digits. disbursed happens to be `1,273.26 crore with the situation that needs you to travel Some funds have given returns of 20%, in 82 funds. “Generally, about 15 to 20% of is home to one of the world’s most valued get returns in investors given the fact overseas, and you have to do road shows while some have not been able to give the money committed per year is actually startup companies in the last few years, high single- that in sectors such as for about a month (raising money from returns at all because of the kind of bets disbursed,” says Kapur. has enhanced its role in startup funding foreign investors),” says Sanjay Nath, they have taken on startup companies. Some experts believe that the institu- through investments in venture funds. digits. Some agriculture, if there is managing partner at Blume Ventures, The bad apples come first and the multi- tion should be better known internation- According to the consultancy company funds have given returns an Indian fi nancial institution willing which had SIDBI as a participant in its baggers usually come at the end of the ally to help drive the credibility of fund Zero2IPO, Chinese government-backed first fund and a key domestic anchor in- fund life,” said Kapur, who refuses to dis- managers backed by SIDBI. They also venture funds tripled their money under of 20%, while some have to take the bet, then they are more vestor for its second fund. close the names of the funds that haven’t would like the institution to support management in a single year to 2.2 tril- not been able to give than happy to come in. Furthermore, fund managers say that done well. much larger funds than the average $15 lion Yuan ($ 330 billion) in 2015. local money gives them more independ- The biggest challenge so far, however to 25 million corpus it has backed so far. Last year, the Chinese cabinet sought returns at all because REMA SUBRAMANIAN, Managing Partner, ence and decision autonomy, compared is the difference between the amount “There is an abundance of seed capital in an increase in the fund flow to startups of the kind of bets they Ankur Capital to financing by larger venture funds such committed by SIDBI and the amount dis- the country, but there is a serious need for from government-funded venture funds. as Sequoia Capital and Accel Partners, bursed. Some fund managers are able to more Series B and Series C funds. The key Early this year, the government estab- have taken on startup which largely run as affiliates of US enti- leverage SIDBI’s name and commitment issue is limited participation from larger lished a 100 billion Yuan (US$14.5 billion) cos. The bad apples The delta between ties. “There are studies to show that in for traction from other investors; others institutions such as LIC, Employees state fund, called The China Internet China and India, local managers have are not. Therefore, there is often a huge Provident Fund and other private insur- Investment Fund, to back Internet com- come fi rst and the multi- domestic and foreign given better returns to LPs than funds time lag – of five years or even longer -- ance companies. They need to expand panies and technological innovations. LPs has reduced a lot. dominated by foreign capital,” says Nath. between SIDBI giving a commitment and their exposure to this asset class,” says Contributions to the fund largely came baggers usually come at The modus operandi at SIDBI is more the fund closing the entire intended cor- Mohandas Pai. For India’s venture capi- from state-owned banks and companies. the end of the fund life. A diverse mix of LPs of a facilitator than of an investor. Fund pus. The total commitments from SIDBI tal industry, there’s, perhaps, a lesson AJAY KUMAR KAPUR, will help everyone. managers piece together their plans and so far have amounted to `3,521.29 crore to be borrowed from its northern neigh- come up with a detailed memorandum for 125 funds, although the actual amount bour. The government in China, which [email protected] Deputy Managing Director, SIDBI SANJAY NATH, Managing Partner, Blume Ventures Kick-starting Interactive Game Content with AI Deal Corner cade games, casual games, puzzles, animation and graphics. Behind the Mobile Gaming Startup Hot Startup scenes, this interactive media engine platform consists of a vast neural net- work, which can be used by interactive ` Absentia content designers to create games, Mech Mocha Raises 32 crore GIFs and animation in a short time. “With Chhota Bheem, we were focusing on “This means that content creators Our Bureau children, but with our new games this year Norah AI is a bot that can can train the machine with a movie we will look at individuals over the age of and Norah would automatically gen- create game designs erate a high-end game,” said Shubham Bengaluru: Mobile gaming startup Mech 22, those who are college-going or young Mishra, CEO of Absentia. Mocha has raised $5 million (about ` 32 working professionals,” Kapoor said. “We will on simple commands The startup recently raised about `8 crore) in a series A funding round led by Accel even target gamers over the age of 30 and, crore from investors led by Exfinity Partners and including Chinese venture capi- by early 2018, we will look to create women Venture Partners and former tal firm Shunwei Capital and existing investor centric games for housewives, teenagers and Infosys executives V Balakrishnan, Blume Ventures. A significant portion of the so on.” [email protected] Mohandas Pai, Deepak Ghaisas and Mech Mocha is exploring partnerships with Girish Paranjpe, among others. funds raised will be used to develop games in Bengaluru: Three computer science “The team definitely has a first-mov- the casual and mid-core game genre. global gaming companies to release their dropouts from BI TS Pi lani in Goa, who er advantage in the Indian market. “We are focused on creating games for the gaming titles in India. It is planning to lever- founded a tech startup with the aim Gaming and entertainment will be Indian market, but part of our business is to age its Indian market insights and in-house to create India’s first virtual reality the primary sector they will focus on. bring global games to India. Having someone technology platform to culturally orient operating system, are developing an However, the use-cases for their prod- internal in China will be useful in develop- narratives and customise gameplay for an artificial intelligence engine that can uct are also prevalent in the education, Indian audience. It will deploy funds towards create interactive content for games at health, travel and hospitality sectors,” ing strategic partnerships, besides guidance a faster pace and with minimal human said Chinnu Senthilkumar, CTO at on market growth,” said Arpita Kapoor, co- creating an integrated technology platform intervention. Exfinity Venture Partners. founder of Mech Mocha. with capabilities in behavioural analytics and The team, which started Absentia in Research and discussion trials of The Bengaluru-based startup plans to bring multiplayer options, among other aspects. early 2015, worked for three years to the product are being carried out in Chinese mobile games into the Indian market “The Indian mobile gaming sector is growing From left: Harikrishna Valiyath, Vrushali Prasade and Shubham Mishra integrate virtual reality technology California, New York and Stockholm. over time. ET had reported in January that at a fast pace and holds great opportunity. with digital video content for brands Bengaluru-based Absentia was We hope to share our experience in China and and created its own headset, similar ters, weapons and varied game scenes broad, man with curly hair’ and the founded by Prasade, Mishra and Shunwei Capital, started by Xiaomi founder to the Oculus Rift virtual reality sys- based on text or pictorial inputs. character is generated. Harikrishna Valiyath. Lei Jun, would make its debut investment in use it to create new opportunities for Mech tem. It is now building and testing the “We are launching it in July or “Our tool wi l l help create up to 8 0% of “We dropped out at the time because India and was in talks to pick up a stake in the Mocha in India,” said Tuck Lye Koh, founding artificial intelligence product called August and are already working with the game design and structure within we saw an opportunity in the virtual gaming startup along with Accel Partners. partner of Shunwei Capital. Norah AI. various indie developers who will test two or three hours and could poten- reality tech market and didn’t want to The company plans to launch at least two In December 2015, the startup raised $1 In simple terms, Norah AI is a bot its user applications,” said Vrushali tially reduce game development to ap- miss the bus. Our focus area over the games in 2017, specifically catering to the million in a seed round led by Blume Ventures that can create game designs and Prasade, CTO at Absentia. proximately two weeks,” said Prasade. next two to three years will be towards and Flipkart. The mobile gaming company structures in response to simple com- An individual who lacks coding According to the founders, Norah AI integrating virtual reality technology Indian market. Its first game, Chhota Bheem mands. These include machine-gen- abilities simply has to give Norah AI a would be able to create a completely in the gaming, media and entertain- - Himalayan Game, has nearly one million was founded by IIIT Gwalior graduates Arpita erated storylines, dialogues, charac- text-based input such as, ‘Create a tall, new set of interactive content for ar- ment space in India,” said Prasade. monthly active users. Kapoor, Mohit Rangaraju and Shilp Gupta.