VC firms in the country raised around $2.5 billion in capital during 2024, up from $1.9 billion in 2023, according to PitchBook data.
ETtechMeanwhile, deal activity remained muted this calendar year, improving slightly from last year. As per Venture Intelligence, VC investments totalled $10.9 billion till December 13, up from $9.6 billion in 2023.
Firms such as Mamaearth-backer Stellaris Venture Partners, early Bluestone investor IvyCap Ventures, former KKR India CEO Sanjay Nayar’s Sorin Investments, and climate-focused investor Avaana Capital closed massive funds this year.
However, multiple venture capital investors, whom ET spoke with, said coming off from the highs of 2021 and early 2022, the reset in the ecosystem has manifested in several ways. This includes a churn in the industry that saw many senior executives move on from their investment firms to other entities or start their own investment platforms, a change in mix for early-stage investing that saw large firms take a backseat paving the way for relatively smaller funds and micro VCs to step up, and the inherent investor caution that is leading to follow-on rounds for early-stage startups happening after a longer interval.
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Some of these trends were reflected in major announcements by firms such as Peak XV Partners, which downsized its $2.85 billion fund by 16% in October—more than a year after it split from Silicon Valley heavyweight Sequoia Capital.
ETtechAnother major development came from Silicon Valley-based VC firm General Catalyst, a backer of global tech giants such as Airbnb, Snap, Canva and Stripe. The firm had said in June it will acquire India-focused early-stage investor Venture Highway, founded by former WhatsApp business head Neeraj Arora.
After a lull in large-sized deals in 2023, companies across sectors such as Zepto, Rapido, PhysicsWallah, Mintifi, Atlan, Healthkart and Finova Capital closed mega rounds of more than $100 million.
Executive churn
According to Longhouse Consulting, at least 22 senior executives at VC firms exited and moved to different firms or started their own investment platforms. These include Nexus Venture Partners’ Sameer Brij Verma, who started his own firm Northpoint Capital, and former ICICI Venture partner Subeer Monga who joined Sorin Investments.
“We saw in several cases with larger or older funds that risk appetite within the firm changed as a result of a specific event or macro developments…for some of the partners this would become a point of dissonance with the firm’s philosophy. That is when people will leave to start investing on their own by deciding their own terms,” said a partner at a global VC firm’s India unit.
Some such as Stellaris Venture Partners and Elevation Capital promoted executives to partners to grow their investment expertise.
“As the Indian startup landscape has matured, the technological and business complexity of new companies has increased. There is a clear need for venture firms and individual investment professionals to specialise,” said Ritesh Banglani, founder and partner at Stellaris.
“At our firm, each individual focuses on a small set of sectors where they build knowledge and expertise over years. We also bring in technology expertise into our investment team every time there’s a platform shift – we have just hired an AI/ML engineering leader as an investment principal in our team. Other firms try to achieve this by focusing only on specific sectors or technologies,” he added.
ETtechChanging investment mix
With the notable absence of global investors such as Tiger Global and SoftBank over the last two years, in addition to larger investors such as Peak XV Partners and Lightspeed focusing more on a select base of late-stage investments, some of the relatively smaller firms are taking the lead on seed investments.
As per Venture Intelligence, early-stage deals worth $1.7 billion were closed in India during 2024 (till December 13), marginally higher than $1.6 billion in 2023.
“The size of the fund usually decides cheque strategy…if a VC firm has a fund of over $500 million in size, smaller cheques and seed investments don’t make sense for them. The very few exceptions to this include (former Zomato top executive) Mohit Gupta’s Lyskraft and (AI startup) Sarvam,” a senior VC firm executive said.
Omnichannel premium apparel marketplace Lyskraft closed a $26 million seed funding round from Peak XV, Prosus and Sofina this year, while Sarvam closed a $41 million seed round late 2023 led by Lightspeed.
ETtech“Growth capital is still hard…Tiger Global has not been investing, SoftBank has been very selective…there was a point when Tiger Global was writing $5 million seed cheques. With all of those large funds staying away, it brings sanity in the seed stage market…it gives us time to look at startups, do the necessary due diligence and then decide,” Rutvik Doshi, general partner at early-stage VC firm Athera Venture Partners said.
The current scenario is driving an increase in micro VCs or specialised funds raising capital. This year, micro VCs like Volt Capital and AJVC got launched while those such as consumer-focused Sauce VC raised money.
AJVC was launched by former Venture Highway executive Aviral Bhatnagar.