A Clutch of Mi­cro VCs Digs Deep to Find Next Uni­corns

Fo­cus is now on ar­eas such as IoT, ro­bot­ics, ar­ti­fi­cial in­tel­li­gence, vir­tual re­al­ity and 3D print­ing

The Economic Times - - Disruption: Startups & Tech - Taslima.Khan@ times­group.com

New Delhi: A clutch of new mi­cro ven­ture cap­i­tal (VC) firms, Endiya Part­ners, Param­para Cap­i­tal and pi Ven­tures, are in­creas­ingly modelling their in­vest­ment strat­egy to stay away from con­sumer in­ter­net com­pa­nies and fo­cus on deep tech­nol­ogy star­tups. Th­ese VC firms, who have re­cently mopped up cap­i­tal or are in the process of clos­ing their maiden funds, are com­pletely fo­cused on ar­eas like IoT (in­ter­net of things), ro­bot­ics, ar­ti­fi­cial in­tel­li­gence (AI), vir­tual re­al­ity (VR) and 3D print­ing.

The ris­ing fo­cus on th­ese com­pa­nies comes at a time when large VCs are also look­ing be­yond con­sumer in­ter­net to ar­eas like soft­ware and busi­ness-to-busi­ness (B2B) com­pa­nies. Star­tups typ­i­cally raise fund­ing from VCs like Se­quoia and SAIF Part­ners af­ter rais­ing seed/an­gel round from mi­cro VCs, who cre­ate a fun­nel of deal flow.

pi Ven­tures is in the process of clos­ing its first fund worth $30 mil­lion, launched last year, which is ded­i­cated to AI space. “There is a lot of IP (in­tel­lec­tual prop­erty) led prod­uct in­no­va­tion hap­pen­ing in In­dia. A prob­lem to be solved cou­pled with an IP, which makes sure that it can be solved in a unique way, makes for a great in­vestable case. That’s the new the­sis,” says Man­ish Sing­hal, the found­ing part­ner of pi Ven­tures.

Star­tups en­abling health­care through AI re­mains the most at­trac­tive bet for the fir m which is see­ing about five to eight AI star-

tups per week. Un­sus­tain­able busi­ness mod­els of con­sumer-fac­ing busi­nesses, most of which are run­ning into huge losses, is one of the big­gest rea­sons why newer ven­ture funds are in­creas­ingly sharp­en­ing their fo­cus to­wards B2B star­tups with sus­tain­able mod­els.

“No­body can fund losses for a long time,” said Sa­teesh An­dra, MD at Endiya Part­ners, which

plans to make five-to-six in­vest­ments this year across star­tups in soft­ware as a ser­vice (SaaS), en­ter­prise se­cu­rity, AI, VR, ro­bot­ics, 3D Print­ing and IoT.

“Ven­ture in­vestors have been copy­ing in­vest­ments in large play con­sumer-fo­cused com­pa­nies, wherein it is dif­fi­cult to es­tab­lish a money mak­ing busi­ness model. How­ever, there is a clear slow down from them now,” An­dra said.

Param­para Cap­i­tal, which is tar­get­ing a ₹ 100-crore fund by March and has tied up with the al­ter­na­tive as­set man­age­ment arm of in­fra­struc­ture-fo­cused lender IDFC, also plans to avoid con­sumer in­ter­net — which it terms “capex heavy” busi­ness. The fund’s stip­u­lated strat­egy is to in­vest in IP-backed tech­nol­ogy ven­tures in ar­eas such as cy­ber se­cu­rity, ma­chine learn­ing and oth­ers. “We stay away from B2C, ecom- merce and app-only busi­ness mod­els wherein the model is de­pen­dent on down­loads,” said Jatin De­sai, gen­eral part­ner, Param­para Cap­i­tal, who is eye­ing three-to-four deals this year.

Exfin­ity ven­tures, founded by for­mer In­fosys CFO V Balakr­ish­nan, re­cently floated its sec­ond fund with the cor­pus of Rs 300 crore last De­cem­ber and counts it­self as the first B2B en­ter­prise tech­nol­ogy fund.

Star­tups typ­i­cally raise fund­ing from VCs af­ter rais­ing seed/an­gel round from mi­cro VCs

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