New fund aims at early stage tech start-ups2 min read . Updated: 17 Apr 2013, 12:53 AM IST
Fund to process 300 applications every quarter; selected start-ups will receive funds between $150,000-300,000
Bangalore: A group of investors and venture capitalists led by the private equity fund set up by Manipal Education and Medical Group head Ranjan Pai and former Infosys director Mohandas Pai are investing in an accelerator fund for early-stage social media, mobile and cloud computing start-ups.
The Habit Fund will be managed by Silicon Valley venture capitalist and entrepreneur Sunil Bhargava of mobile start-up incubator Tandem Capital and Rohit Bhagat, former Asia Pacific chairman of BlackRock Inc., and aims to raise $75-100 million, according to two people directly familiar with the matter, requesting anonymity.
The accelerator will process about 300 start-up applications every quarter, of which about a dozen will be shortlisted for Series A, or early-stage funding. It will take about another quarter to be fully operational, said one of the people cited above.
Each start-up will receive anywhere between $150,000-300,000 in funding, depending on requirements.
“This fund is going to invest in the intersection of mobile and consumer...and the accelerator will be based in Bangalore," said the person. So far, about $25 million has been committed towards the fund, which has started processing applications. At least four start-ups have been shortlisted and are close to securing funding.
“There are going to be a few ideas that are going to be global in their outreach and be successful with far less levels of investment than earlier. This entire fund focuses on ideas which touch these three aspects—social, mobile and cloud," said the second person familiar with the matter.
Neither Bhagat nor Bhargava responded to email requests for comment. A Manipal Education spokesperson declined to comment on the matter.
India’s fledgling start-up ecosystem has witnessed an exodus of talent to other lucrative entrepreneurial destinations such as Silicon Valley and Chile, with entrepreneurs having easier access to customers, funding and mentors.
According to experts and investors, getting Series A funding in India is much tougher than primary seed funding and the country needs an ecosystem of venture capitalists and accelerators that are more willing to hedge their bets on early-stage start-ups.
“The problem has been that a lot of seed-funded companies have not been able to raise a Series A round," said Deepak Srinath, who leads the technology and emerging sectors practice at Allegro Advisors Pvt. Ltd, an investment bank.
Most venture capitalists in India are hesitant about investing in early stage start-ups unless they have a robust and sustainable business model.
“Any business model that is not going to generate revenues in the first year or two or is going to take a very long time to break even, will find it more challenging to get funded in this environment," said Srinath.
Avinash Gupta, senior director at Deloitte Touche Tohmatsu India Pvt. Ltd, said, “Getting capital at an early stage (in India) is very difficult. The probability of failure is highest at that level, so people are very, very careful about putting in their money at an early stage."