Indian VCs raise new funds after profitable exits, signaling next investment tide

Limited Partners are warming up to invest in venture capital firms backing startups with great potential.

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As venture capital firms–both Global and Indian–are set to part with a portion of their stake in Indian unicorns for a reported return of USD 2.5 billion, India-based or India-focused funds are now in talks with their LPs (limited partners) for further fundraising, signaling an upcoming wave of active startup investment deals in the country.

Venture capital firm Accel Partners, known for its early bets in unicorns such as Flipkart, Swiggy and Freshworks is likely to raise USD 500 million for a new fund, while Sequoia Capital has increased its sixth India and Southeast Asia fund by USD 200 million totalling its fund size to be at USD 895 million. It has also allocated USD 200 million for its seed-stage programme, Surge.

At least six more early stage VCs including Endiya Partners, Kalaari Capital, Blume, and India Quotient are expected to raise fresh round of funds from their LPs in the remaining months of 2019. Early-stage investor Kae Capital is in talks to raise its third fund of up to USD 60 million. In 2017 it raised USD 53 million for its second fund. It is interested to participate in seed stage funding across mobile, e-commerce, consumer internet, education and healthcare sectors.

Thirteen-year-old Chiratae Venture Partners (formerly known as IDG Venture Partners) that is looking to raise a total of USD 300 million, is close to finalizing the first tranche of USD 150 million. Lightspeed Venture Partners that has invested in companies including Sharechat, Limeroad, among many others, is set to raise USD 200-250 million in its kitty, and Kalaari Venture Partners, is up to grab USD 200 million in private equity.

Although, India’s economy and jobs in almost all sectors are seeing a downward trend, it hasn’t affected the technology startups yet. On the contrary, it’s the only sector in India currently that is on a hiring spree. All this has led to increasing investor’s sentiment in the space.

Tiger Global’s former executive Lee Fixel, who after announcing his departure from Indian startup eco-system in March this year, is reportedly preparing to invest around USD 1 billion dollar in Indian startups. He had orchestrated Walmart’s buyout of e-tailer Flipkart, including the crucial funding of Indian unicorns like cab aggregator Ola, third-party logistics service provider Delhivery and classified advertising platform Quikr. Fixel might invest USD 24 million in the seed round of fintech startup Amica Technologies, in his personal capacity.

Chinese investors are also making major inroads in Indian startups by having invested USD 2.5 billion in 2018 and pumping in USD 1 billion in the first half of 2019 according to Venture Intelligence. Major Chinese VC firms include Shunwei Capital, Fosun International, Tencent Holdings, Xiaomi, and Alibaba Group Holding. There is also investor interest in the Indian startup ecosystem from the Middle East apart from early players based in the US, China, and Japan.