Homegrown venture fund Arkam Ventures, previously known as Unitary Helion, said it has received commitments of ₹325 crore for its fund of ₹700 crore to invest in early-stage technology startups.
The new fund’s investors include Small Industries Development Bank of India, Capria, an American investment firm, and entrepreneurs including Flipkart co-founder Binny Bansal and Paytm founder Vijay Shekhar Sharma. The rest of the fund, about ₹375 crore, is expected to close by the end of this financial year.
Arkam Ventures was started as Unitary Helion in 2017 by Rahul Chandra, a former managing director at Helion Venture Partners, and Bala Srinivasa, a former partner at Kalaari Partners. It has changed its name to Arkam Ventures to avoid any confusion with Helion Venture Partners, now defunct.
From its first fund, Arkam Ventures expects to back 15 to 18 companies at the Series A and Series B stages. Its initial investment sizes will be in the range of ₹15-30 crore. The fund has already invested in lending startup Krazybee and business-to-business grocery platform Jumbotail and said it in the process of backing three more startups, which operate in financial services and agriculture technology.
The fund’s investment thesis is around finding startups that cater to the so-called middle India comprising around 400 million people whose annual family incomes range between ₹3-20 lakhs.
“(This) market is very large, but has huge inefficiencies in the form of broken supply chains, limited access to credit, and outdated brick and mortar infrastructure, all which was magnified during the covid crisis. Founders who combine a deep understanding of middle India, and leverage technology to design low cost solutions and efficient new business models can build highly differentiated and scalable businesses," Srinivasa said.
The fund seeks startups in four areas: financial services, healthcare, food or agriculture and transportation. It estimates that these areas account for about 70% of the spending by the 400 million people, many of whom live in smaller cities and towns.
“We look at three main things. One, the product should be built primarily for middle India instead of the top 1% of the population. In the past, there have been too many instances of companies whose products cater to the top 1% and who then spend too much money to take these products to middle India. Two, the startup should be able to distribute their products efficiently to this audience. And three, the business model should have the potential of making money very soon, if not from day one," Srinivasa said.
The fund raise by Arkam Ventures comes when most of India’s startups (and other companies) have been badly hit by the lockdowns across the country since late March. Thousands of jobs have been lost and more cuts are expected over the coming months at startups, along with down rounds and distressed sales.
Even for VCs raising capital has become tougher and some may be forced to delay raising their next funds. Deal making has plunged since March and will see a sharp from last year’s levels, VCs say. This, however, heralds a shift in power back to investors after a two-year-long funding boom during which startups were spoilt for choice of backers.
The pandemic is also accelerating digitisation in many sectors, which will create attractive opportunities for entrepreneurs and investors in these spaces.
Arkam Ventures has also put together a group of advisors including Ravi Venkatesan, former chief executive officer of Microsoft India, Reliance Jio president Vikas Choudhry and Big Basket human resources chief Hari TN. They will help the fund make investment decisions and provide advice to its portfolio companies.