Indian startups in their earlier stages need more patient capital through evergreen or longer-lived fund structures, as wealth creation often extends beyond the traditional venture capital (VC) cycle, Dinesh Pai, who leads Zerodha-backed Rainmatter's venture investments, said in an interview.
“While VCs have driven significant innovation in India, startups need more patient, entrepreneurial capital or longer fund structures, as most wealth creation happens over a company’s lifecycle, not in the first seven to eight years,” Pai said, adding that the concept of evergreen funds is more prominent in developed markets like the US.
An evergreen fund is an open-ended investment vehicle that has no fixed end date and allows investors to add or withdraw capital on a periodic basis.
Patient capital
Historically, entrepreneurs with successful exits from their previous ventures often go on to support other startups. Beyond the capital itself, who provides it matters, Pai emphasized. He added that startup founders should more actively seek these pools as entrepreneurs understand the complexities of building a business in ways traditional VCs may not easily grasp.
As the risk-taking appetite improves among family offices and entrepreneurial ventures, founders should look for more patient capital at the early stages, when the company, culture and team are still being built. These investors who understand the sector and can back businesses for the long term can be particularly valuable, Pai said.
However, there are some limitations in sectors like commerce or food delivery, where business models require significant amounts of capital. “In such spaces, founders need investors who understand these models and have experience backing them through multiple rounds,” Pai said.
For capex-heavy or deep-tech businesses, where the initial capital requirement is even higher, the depth of investors’ pockets becomes particularly important. “In those situations, they can leverage a mix of entrepreneurial and venture capital,” he said.
Rainmatter model
Rainmatter Capital, the venture investing arm of brokerage platform Zerodha, has deployed about ₹1,700 crore across 180 startups over the last decade. It invests jointly, both out of its new ₹1,000 crore alternative investment fund (AIF) called Rainmatter Capital Fund, which has a lifecycle of 17 years with a 2-year extension, and the Zerodha balance sheet, like how many corporate venture funds operate.
With a focus on the early stages, more than 90% of the teams have stayed committed to the problem they started with, even through tough times, he said. “Whether they succeed financially, only time will tell—we probably need another five to six years to know. But for a young portfolio, that persistence is a good sign that things are moving in the right direction,” Pai added.
Where money goes
Rainmatter has been steadily deploying about ₹400-500 crore every year across three main sectors—climate (50 investments), fintech (38) and health & fitness (46). It has also done some select investments in media (9), manufacturing, deeptech and a few other sub segments (16). Some of its investments include Agnikul Cosmos, Akshayakalpa, Cred, Hissa, Jupiter and Agilitas.
“In fintech, we are trying to back more disruptive models...as most of the innovation we are seeing now focuses on serving different customer segments or making incremental improvements on existing concepts. We want to back teams that are willing to rethink some of these models from the ground up as we believe that there are products that can still bring about different or small behavioural changes," Pai said.
In sectors like climate and health & wellness, the investment firm has been able to back a more diverse set of opportunities around energy transition and consumer facing startups.
Rainmatter’s cheque sizes range anywhere between ₹50 lakh to as high as ₹100 crore. “Over the past couple of years, we have stopped doing smaller cheques as the round sizes across startups have also widened. For seed rounds, companies are now seeking about ₹5-8 crore,” Pai said.