Hyderabad: Ventureast is one of the longest standing venture capital (VC) fund managers in India, investing since 1997 and managing close to over $400 million. The company has a diverse portfolio of more than 100 investments in technology, healthcare and clean environment. The company has dedicated funds and teams for life sciences and healthcare, and separately for technology-driven businesses. Srikanth Sundararajan, partner of Ventureast, tells Y V Phani Raj about the funding patterns in the country and potential the company sees in investing in Indian startups.
VC funding in India
The VC funding scenario is cautiously optimistic. Good growth stage companies continue to attract capital at the Series C/D or later rounds. Some VCs have also started up early stage seed funds, which have been instrumental in helping early stage companies; the angel investments have been a little muted due to the angel tax issue, which will hopefully be resolved.
Bengaluru, NCR, Mumbai, Hyderabad, Pune and Chennai are the dominant cities where startup clusters are developing. FinTech startups are concentrated in Bengaluru, while HealthTech startups are emerging from both Hyderabad and Bengaluru. Though several startups are mushrooming in artificial intelligence and machine learning pan-India, there are very few that are promising.
TRS working president K T Rama Rao and Telangana IT and Industries secretary Jayesh Ranjan have done a phenomenal job in keeping the focus going on startups. In the coming years, more startups will be attracted to Hyderabad, as there is a perfect confluence of industry, State government support and presence of premium academic institutions. The city has a right combination of the needed ingredients in a close area, which none of the other cities have. New investors are also coming. Hyderabad Angels is also very active here. All this will augur well for Hyderabad and Telangana.
Incubators and accelerators
The experience with incubators and accelerators in India had been a mixed one. I accept that startups are groomed well through incubators. But there are too many than needed, which is spoiling the quality.
Ventureast will invest until the end of the investment period for the current fund, which would be August of 2020; typically we stay invested in our portfolio until we see an exit opportunity either through a conventional IPO route or secondary buyout of our equity.
Typically Ventureast’s rejection rate is about 80 per cent or larger. Some common reasons would be the opportunity is too earlier, the founding team may not have the depth, market size is not adequate, or there are no co-investors interested in the deal.
Weighing startup potential
Market size, ability to execute, current track record and the quality of the founding team typically are critical factors. We also do benchmarking viz similar companies that have raised funds in the recent past, and in different geos.
Competition in VC space
We do not look at other VCs as competition, the entire community is fairly close and we do exchange views, and typically we do co-invest with several VCs.