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
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