Micro VCs are blooming in India: IVCA-AWS-Praxis Report

Indian Private Equity and Venture Capital Association (IVCA) and Amazon Web Services (AWS) have co-authored a report with Praxis Global Alliance on Micro VCs, defined here as fund size  below US$ 30M. This is the first ever initiative in the Indian Startup-VC Ecosystem to especially capture the Micro VC segment.

In the past decade, Micro VCs have emerged as promising players in the Indian startup investor landscape providing much needed risk capital as well as hands on mentorship to their portfolio companies. They are giving the much-needed risk capital as businesses seek to achieve product market fit and become ready to scale with stable business models. Micro VCs are blooming in India, have increased to 88 funds in 2020 from 29 in 2014. The increase in number is driven by India’s booming startup ecosystem, micro VCs’ ability to fill the funding gap between institutional and angel investors and increasing domestic LP interest in startups.

The report is backed by responses from around 50 Micro VCs on their investment strategies, portfolio companies as well as their value proposition for LPs. Some of the key highlights and insights from the survey are listed below:

High risk, high return seed cheques have yielded fantastic returns and have enabled supported multiple unicorns at an early stage thus highlighting the rationale and need for early stage investing

• Micro VCs have infused US$ 341M in the Indian startup ecosystem through 730 deals across 566 startups in the past 3 years
• Micro VCs typically invest in the sunrise sectors, ~60% of micro VC investment in 2020 were in SaaS/AI sector, consumer apps and platforms, Ecommerce, and listing platforms
• Of the micro VCs surveyed in the study, 52% are sector agnostic; SaaS/AI, BFSI, Healthcare and life sciences are the major focus verticals for micro VCs

Commenting on the launch, Rajat Tandon, President, IVCA, said : "The Micro VC stage of investments with a smaller fund size is the highest risk capital asset class that is supporting India’s next-gen innovation driven entrepreneurs. Several smaller funds that started a decade ago have not only enabled an established Startup-VC ecosystem that we witness today, but have also outgrown themselves, supporting their early bets in later rounds as well. Some of those startup founders have grown to become Angel/VC investors or Limited Partners (investors in VC funds) themselves. Such is the compounding effect and importance of Micro VC funds, through this report we are celebrating and bringing these young and/or first time fund managers mainstream."

Madhur Singhal, Managing Director, Praxis Global Alliance said, “Micro-VCs are playing a crucial role in the Indian startup ecosystem, making contrarian bets and supporting untested ideas. This report is one of the firsts at recognizing the contribution of these micro-VCs and exploring the evolution of this segment, their investment thesis and success stories.”

India has a vibrant and prosperous startup ecosystem which is booming. The growth of these startups is supported by investors ranging from angels and incubators to large global VC funds. Micro VCs are undoubtedly playing a material role in the growth of startups in India. They are giving the much-needed risk capital as businesses seek to achieve product market fit and become ready to scale with stable business models.

AWS works with the Private Equity (PE) and the Venture Capital (VC) community across the world to offer technical training, business mentorship, and go-to-market support to help their portfolio companies grow new startups on AWS Cloud. AWS offers promotional credits through AWS Activate, a program which supports early-stage founders to launch and grow successful businesses; training and certification programs to upskill VC and Micro-VC portfolio companies’ employees; and over 200 fully featured services to enable companies to lower costs, become more agile, and innovate faster.