Catching them young

1. Catching them Young
Providing seed capital, the first funding for a startup, is no longer the
preserve of specialist seed investors. With a surfeit of money
available, venture capital funds are competing for seed deals, erasing
long-held distinctions in the world of startup investing, find Evelyn Fok
and Shonali Advani

3. Contd..
Seed funding, typically the earliest investment in a startup, is no longer
the territory of angel investors and dedicated seed funds. Stealthily,
big-ticket venture capital funds that normally make large bets in
startups are writing smaller cheques to younger companies as well,
marking a tectonic shift in investment dynamics.“Investors are playing
across the entire funding continuum because nobody wants to miss
out--the FOMO (fear of missing out) effect,“ said Sanjay Anandaram,
venture partner at Seedfund and an adviser at software product think-
tank iSPIRT. “These firms are able to seed the seedlings as they grow
and cherry pick the ones that they really want to back with big bucks.“

4. Contd..
While venture capital firms in India have always invested seed money on
occasion, a clear trend emerged in mid-2014 when a handful put in more
than a dozen such investments.ET, in a survey conducted in collaboration
with startup analytics firm Tracxn, found that institutional funds and angel
investors now have similar leverage with entrepreneurs looking to raise seed
rounds. Prior ET research found that in 2014 major VCs had closed more
than 60 seed cheques of up to Rs 5-6 crore apiece.
This means expanded options for entrepreneurs, said Rehan Yar Khan, serial
entrepreneur who leads early-stage fund Orios Venture Partners. “They can
now choose between taking less money at a low dilution from smaller funds
or taking more money at a higher dilution from larger funds,“ he said.
“Angels are seeing fewer deals as a result and are having to come in even
earlier, often at the ideation stage.“

5. Contd..
Startup founders appear to welcome this development. Not only do large venture
capital funds offer experienced operations teams that can help early-stage
companies scale at speed, the brand recognition that comes with being backed by a
reputable name can go to lengths in a ruthlessly competitive startup ecosystem.
And then there is the potential of follow-on funding that is hard to ignore. This shift
has upped the average ticket size and now seed-stage cheques range from as small
as $100,000 (about Rs 65 lakh) to $1 million, often resulting in founders raising
more money than they need. “There are a lot of funds (or micro funds) coming up
who are competing with institutional investors for early-stage deals, so it's made
the environment more competitive,“ said Shanti Mohan, founder and CEO,
LetsVenture, a deal discovery platform for earlystage deals.
The downsides can be equally painful, said Abhishek Goyal, cofounder of Tracxn.
“This will allow entrepreneurs to have significant capital in early days and hence
scale their companies quickly... (But) the biggest risk is that startups may scale a lot
before figuring out product-market fit and run into the risk of getting caught on the
wrong foot,“ he said.

6. Contd..
Also, if a startup is struggling or the market has changed and an institutional
investor doesn't want to reinvest, “it's doomsday for an entrepreneur,“ said Mohan
of LetsVenture. “The signaling effect is very strong with institutional investors.“.
SEQUOIA CAPITAL Shailendra Singh, Managing Director
Sequoia Capital that has been investing in India since 2006 has backed some of the
country's most-touted startups-Ola, Zomato, Druva, and FreeCharge, which was
acquired by ecom merce major Snapdeal in a landmark acquisition deal this year.
The venture fund, which typically invests in earlyto growth-stage startups, has
become quite active in seed-stage deals, writing cheques as low as $100,000. Some
of its seed investments--including Practo, Grofers, and PepperTap--have gone on to
raise follow-on rounds from other institutional investors. “We often invest very
early in companies with a goal to partner with world-class entrepreneurs in solving
large problems,“ said Shailendra Singh, managing director, Sequoia Capital India
Advisors.

7. Contd..
The venture capital firm brings a `company building' brings a `company
building' mindset along with func tional help in recruiting, marketing, and
technology to the table to help young companies succeed, said Singh.
Sequoia Capital India was the most active investor in Asia between April and
June, according to data by CB Insights, a global database for angel and
venture capital activity.
ACCEL PARTNERS Subrata Mitra, Partner
Accel Partners, a California-headquartered venture capital firm, has made
over 70 seed-stage investments in India since 2004, including in successes
such as Flipkart and Freshdesk. Today, 65-70% of its checks are made at the
seed level, each between $250,000 and $2 million. The firm expects to close
at least 20 seed investments in India this year.

8. Contd..
“We believe the best opportunity to create outstanding assets is in seedearly
stage,“ said Su seedearly stage,“ said Subrata Mitra, partner at Accel India,
adding that this is not an easy stage to execute. “The India market is in its
formative stages in its startup ecosystem and maximum value creation for
our investors is possible by participating in seedand early-stage companies.“
Accel's portfolio is made up of tech companies disrupting large markets in
the consumer, healthcare and he consumer, healthcare and enterprise
industries. Most of the team hails from entre preneurial or operational
preneurial or operational backgrounds, and their core competencies lie in
the pillars of seed invest ing--identifying and building quality teams,
understanding the value of early DNA setting, and helping companies get
product-mar ket fit. Accel has an operating team comprising experts in
product management, marketing, design and technology and dedicated to
helping portfolio companies grow faster.

9. Contd..
BLUME VENTURES Karthik Reddy, Managing Partner
Seed-stage venture fund Blume Ventures, set up in March 2011, has made early bets in 70
companies with its first fund of Rs 140 crore, and has exited 12 of these, including ZipDial and
TaxiForSure.
“This is the stage of investing we enjoy the most,“ said managing partner Karthik Reddy.“We like to
work with founders at an early stage of an idea and help in what ever way we can to build various
elements of a potentially great company--founder mentoring, hiring, direction and choices around
business models.“
Blume makes its bets around energy efficiency, manufacturing and healthcare technology.Ticket
sizes are mostly of $500,000 to $1 million, with Blume usually taking 50-80% of the round. Blume
helps founders solve typical early-stage startup problems and acts as partners.
The firm plans to make 10 invest ments this year from its new $60-million (about Rs 390 crore) fund
that is slated to close later that is slated to close later this year. One-third of its deployable capital
will be for seed investments in startups, and the balance will be for follow-on investments into the
best of those.

10. For details and bookings contact:-
Parveen Kumar Chadha… THINK TANK
(Founder and C.E.O of Saxbee Consultants & Other-Mother
marketingandcommunicationconsultants.com)
Email :-saxbeeconsultants@gmail.com
Mobile No. +91-9818308353
Address:-First Floor G-20(A), Kirti Nagar, New Delhi India Postal Code-110015