Ridiculous seed-stage valuations have gone: Capital A's Ankit Kedia

Co-founded by Ankit Kedia, who was previously the promoter and director at plastic packaging solutions Manjushree Technopack Ltd, Capital A invests in early-stage companies with cheque sizes running from $50,000 to $500,000, primarily in the fintech and climate-tech segments.

In an interaction with VCCircle, Kedia talks about the transition from an entrepreneur to an investor, Capital A’s thesis and its plans. Edited excerpts:

You started as an entrepreneur. What brought you to investing?

I started Capital A with a singular mission of investing in meaningful businesses. While the word ‘meaningful’ has been used very loosely by many people, in my case it was different, because we came from a hardcore operating background. We’ve run businesses, established factories and worked with private equity businesses.

I felt that there was a possibility to combine the mentality of profitable businesses, as well as the nature of early-stage businesses, where you have to give time for them to germinate into something bigger and better.

I’ve been an angel investor since 2018. When (what I did) started to work, and work in the favour of the company and the founder, I felt this was an ability that I should leverage a lot more.

What was raising the first fund like? Was there any external capital involved?

It wasn’t very hard because all of it was proprietary capital that we carved out from the family corpus, so we don’t have any external investors in the fund. Fund II, which we are launching very soon, will have external limited partners. We are talking to a few anchors to back us.

What’s the update on the first fund? How much have you deployed?

We started deploying the first fund from 2021. We will continue to deploy through 2025. So far, we have deployed at least 30% of the capital. About 60% is reserved for follow-ons. We have about 10% more to deploy.

We still have a long way to go for the next one-and-a-half years, given that we’ve become slightly calculative in deployment.

What is your investment thesis?

We come in at almost the idea level, so seed to pre-Series A stages. We’ve picked two sectors. One is fintech, which is slightly more predictable. People have done a lot of work in that space.

The second is climate. We decided electric vehicles and mobility is something that we will go for with our full artillery out. Beyond that, we look for energy transition, alternative materials, revenue, renewable energy and water. We have also classified the deep-tech space, because a lot of tech startups are trying to solve for climate using deep-tech.

Largely, the funnel is focused on investing in climate and fintech, then everything else (about 20-30%) which is technology enabled. We are slightly agnostic over there.

What is your take on valuations? How have the early-stage valuations changed?

In the early stage, the ridiculous task of (super-high) valuation at the seed stage has vanished and I don’t think it is coming back anytime soon. So, valuation correction has definitely happened.

That said, we look at valuation slightly differently. If someone comes with too low a valuation, that shows the founders’ inability to do a market discovery on what they are. And sometimes you have to give a premium valuation to founders who you really believe in, because you have to protect them against future dilution also.