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Business News/ News / Arkam Ventures bullish on manufacturing, EV startups
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Arkam Ventures bullish on manufacturing, EV startups

Arkam marked its first investment in the manufacturing space on Tuesday, jointly leading a $6.3 million Series A funding round in custom manufacturing platform Karkhana.io

Bala Srinivasa, managing director at Arkam Ventures, says that while gestation periods in the manufacturing space are long and barriers to entry could be hard, customer stickiness tends to be high. (Mint)Premium
Bala Srinivasa, managing director at Arkam Ventures, says that while gestation periods in the manufacturing space are long and barriers to entry could be hard, customer stickiness tends to be high. (Mint)

BENGALURU : Digital tech-focused Arkam Ventures has included electric vehicles and manufacturing as areas of focus for its second venture capital fund, in addition to fintech, skilling, software-as-a-service, logistics, and food agriculture, a top executive said.

The second fund, thematically, has a multi-fund thesis, said Bala Srinivasa, managing director at Arkam Ventures. “In this fund, you will see a mix of sectors connected by the digitization thesis. We have added manufacturing and EVs as we just think there are more urgent themes that need to be justified."

Arkam Ventures–which has invested in companies including business-to-business marketplace Jumbotail, investment startup Jar, and lending platform Kreditbee–launched its $180 million second fund last year. The firm is in the process of closing the fundraising for this fund.

On Tuesday, Arkam marked its first investment in the manufacturing space, jointly leading a $6.3 million Series A funding round in custom manufacturing platform Karkhana.io, along with Susquehanna Asia Venture Capital. 

Karkhana.io offers solutions for contract manufacturing across categories like product assembly and product localization. 

“Everybody has come to the conclusion that more transparency, visibility and higher quality needs to be done through technology, and that’s what drove us into investing in a platform like Karkhana," said Srinivasa. 

The funding into Karkhana was from Arkam’s first fund. 

Arkam–founded by former Kalaari Capital partner Srinivasa and former Helion Venture managing director Rahul Chandra–closed its first fund at $106 million in April 2022.

About the manufacturing sector, Srinivasa said while gestation periods are long and barriers to entry could be hard to crack, customer stickiness tends to be higher than for other kinds of tech startups.

“The biggest challenge for manufacturing startups is finding ways to ensure product-market fit. It takes longer to prove it, and as a result you need to have a lot more grit and ability to convince investors to stay in the game."

The environment is right for manufacturing startups because of investors showing interest and tailwinds such as rising domestic demand and the ‘China Plus One’ strategy, said Srinivasa. The ‘China Plus One’ strategy encourages companies to diversify the countries they source from to reduce dependency on China, 

“If small Indian businesses can’t become large manufacturing enterprises, the contribution that they make cannot keep pace with the growing demand, and it would be a lost opportunity," he said.

On the need for digital platforms in manufacturing, Srinivasa pointed to three challenges that small businesses in manufacturing face, related to sourcing of demand, capital and capacity utilisation. 

“An average factory in India has 30-40% unused capacity because of the demand supply disconnect," he said. “There is a lot more demand today and small businesses also understand the shift in supply chain. They are looking to digital platforms to find newer ways to satisfy the surge in demand."

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Published: 09 Jan 2024, 07:34 PM IST
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