Smaller VC firms ride on SIDBI and local investors

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In the past six months, several venture capital (VCs) funds have raised money or are in the process of raising money. These include funds from IDG Ventures, DSG Consumer Partners, Orios Venture Partners, Kae Capital, Blume Ventures, Saama Capital, Fireside Ventures, Stellaris Venture Partners, Endiya Partners and Pravega Ventures.

 

What’s common between them is Sidbi, the lending institution managing several start-up funds, including the government’s, which plays an anchor investor to many of these funds with a 15-20 per cent stake. This is helping these funds raise money from other domestic investors — family offices and high networth individuals (HNIs).

 

‘‘Fundraising is not easy, especially for smaller VC firms. They don’t get large institutional investors; they get family offices and HNIs,” says a VC. Having an institution like Sidbi comforts other local investors.

 

‘‘Sidbi does extensive amount of due-diligence, reporting, appoints board members. They have a proper investment committee. So, you have comfort that there’s institutional due-diligence on the fund,” says Rehan Yar Khan, managing partner, Orios Venture Partners.

 

In February, Sidbi said its fund of funds operations has sanctioned Rs 1,112 crore to 30 funds in FY17, double of Rs 607 crore for 16 funds it did in FY16. Sidbi manages many fund of funds, including the government’s Rs 10,000-crore fund of funds for start-ups.

 

The funds, which have received Sidbi’s commitment under this programme, are Orios Venture Partners Fund II (Rs 50 crore), Kae Capital (Rs 45 crore), and two little known funds, Saha Trust (Rs 10 crore) and Kitven Fund III (Rs 5 crore), Sidbi disclosed in response to an RTI query from Business Standard. There are others like Blume Ventures, IDG Ventures, India Quotient, which have received Sidbi’s funding.

 

Interestingly, several funds — maiden funds and second funds — have hit the market in the past one year, all targeting domestic investors. Yet, all of them are able to raise money and announced their first or final close, which shows the increasing depth of domestic investors.

 

These include professionals in large firms, like Infosys founders, who have made money through ESOPs, family offices of traditional business families and others which are starting to get organised.

 

Many wealth management and advisory firms have come up, who are able to reach these family offices in a more effective way.  But are we seeing too many funds raising too much capital?

 

‘‘There’s a big need for early stage capital. In the US, the size of the VC market is $25-26 billion and the seed capital of $22 billion. As opposed to that, we are at a pittance. The game has not even started here,” says another VC. Besides, bigger VC firms like Accel, Sequoia also do seed-stage deals, but mostly do VC.

Source: http://www.business-standard.com/article/economy-policy/smaller-vc-firms-ride-on-sidbi-and-local-investors-117030900003_1.html

India will be home to 10,500 start-ups by 2020: Report

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India continues to harbour the third largest start-up base, marginally behind the U.K., according to a Nasscom-Zinnov start-up report.

The report, titled “Indian Start-up Ecosystem Maturing – 2016,” says that the ecosystem is poised to grow by an impressive 2.2X to reach more than 10,500 start-ups by the year 2020 despite the popular belief that the Indian start-up ecosystem is slowing down.

There is an increased interest from student entrepreneurs this year, according to the report. A remarkable growth of 25 per cent has been witnessed in 2016 with over 350 ventures founded by young students. The median age of start-up founders has reduced marginally from 32 years in 2015 to 31 years in 2016.

“Technology start-ups are creating a new identity for India and its technological prowess,” said R. Chandrashekhar, President of the IT industry body Nasscom, in a statement. “They are defining the way the world operates making life better and easier for people and businesses alike.”

Some of the notable findings of the report include; continued growth in the number of start-ups in 2016, with Bengaluru, the National Capital Region, and Mumbai continuing to lead as major start-up hubs for the nation.

In terms of vertical growth, investors are looking at the domains like health-tech, fin-tech, and edu-tech. With a total funding of approximately $4 billion, close to 650 young firms were funded signifying an aware and healthy growth of the ecosystem, according to the report.
The number of technology firms in India is expected to grow by 10-12 per cent to over 4,750 start-ups by the end of 2016, according to the report. Interestingly over 1400 new ventures have emerged in 2016 denoting that the ecosystem is becoming prudent with both investors and start-up founders focusing on profitability and optimising the overall spend.

With this impetus, India will become home to over 10,500 start-ups by 2020, employing over 210,000 people reveals the report.

“Today, India is brimming with new ideas which need the right guidance and funding to be scalable for the market,” said C.P. Gurnani, Chairman, Nasscom, in a statement.

Source: http://www.thehindu.com/business/Industry/india-will-be-home-to-10500-startups-by-2020-report/article9272293.ece

India ranks 130th in ease of doing business index

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India continues to rank low at 130th position in terms of ease of doing business, with the country seeing little or no improvement in dealing with construction permits, getting credit and other parameters.

In the World Bank’s latest ‘Doing Business’ report, India’s place remained unchanged from last year’s original ranking of 130 among the 190 economies that were assessed on various parameters. However, the last year’s ranking has been now revised to 131 from which the country has improved its place by one spot.

The government has been making efforts to further improve the ease of doing business and aims to bring the country in the top 50.

Expressing disappointment over no change in India’s ranking in the World Bank’s index on ease of doing business, Indian government regretted that the report did not take into consideration 12 key reforms undertaken by the government.

When it comes to ‘distance to frontier’ — a measurement of the gap between an economy’s performance and the best practice score of 100 — India’s score has improved to 55.27 this year from 53.93 last year.

India is the only country for which the report has a box dedicated to its ongoing economic reforms.

The list of countries in the Doing Business 2017 is topped by New Zealand while Singapore is ranked second. It is followed by Denmark, Hong Kong, South Korea, Norway, the UK, the US, Sweden and former Yugoslav Republic of Macedonia.

Neighbouring Pakistan is ranked 144th in the list.

On the basis of reforms undertaken, the top 10 improvers are Brunei Darussalam, Kazakhstan, Kenya, Belarus, Indonesia, Serbia, Georgia, Pakistan, United Arab Emirates and Bahrain.

A record 137 economies around the world have adopted key reforms that make it easier to start and operate small and medium-sized businesses, the report said.

Developing countries carried out more than 75 per cent of the 283 reforms in the past year, with Sub-Saharan Africa accounting for over one-quarter of all reforms, it added.

“What we have seen is a remarkable effort on the part of the government to implement business reforms. It looks like we are going to have to wait for another year or so. But the direction of change is fundamentally a very significant one,” Global Indicators Group Director Augusto Lopez-Claros told PTI in an interview.

The rankings are based on ten parameters — starting a business, dealing with construction permits, getting electricity, registering property, getting credit, protecting minority investors, paying taxes, trading across borders, enforcing contracts and resolving insolvency.

India has improved its ranking with respect to various areas. In terms of getting electricity, the country’s position has jumped to 26th spot from 51st place last year.

When it comes to trading across borders, the ranking has moved up one place to 143, and in enforcing contracts the rise is of six spots to 172nd position.

However, with respect to starting a business, the ranking has slipped four places to 155th spot and in the case of dealing with construction permits by one rank to 185th.

As per the report, India’s ranking in terms of protecting minority investors dropped to 13th place from 10th position last year.

With regard to getting credit, the ranking has fallen by two places to 44.

Explaining as to why India’s reform efforts is not being reflected in the ease of doing business report, Lopez-Claros said it very often takes some time for the reforms implemented by governments about the regulatory environment to be felt on the ground by the business community.

Rita Ramalho, Manager of the Doing Business project said that there were in fact improvements this year.

“There are four areas of improvement this year in India getting electricity, trading across border, enforcing contracts and paying taxes,” Ramalho told PTI.

India’s ranking is based on the study of the system in the two cities of Mumbai and New Delhi.

“The reason why there is no real movement in the ranking is more to do with the fact that other countries are also moving. In absolute terms India, does improve significantly.

There aren’t many countries that improved more than India in terms of absolute number,” Ramalho said.

The ‘Doing Business’ project provides objective measures of business regulations for local firms in economies and selected cities at the sub-national level.

The World Bank is emphasising that countries pay attention to what it calls “distance to frontier” which is an absolute metric, Lopez-Claros said.

“There has been actually substantial increase in the last 12 months in India by couple of percentage points, which is quite large,” he noted.

Source: http://www.businesstoday.in/current/economy-politics/india-ranks-130th-in-ease-of-doing-business-index/story/238944.html

RBI spells out rules for start-ups to raise ECBs

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To support financing for start-ups, the Reserve Bank of India (RBI) on Thursday issued rules permitting these to raise external commercial borrowings (ECBs).

 

In a statement, RBI said the borrowing per start-up was capped at $3 million per financial year. It could be either in rupees or a convertible foreign currency or a combination of both.

 

The money could be used for any expenditure of the borrower’s business.

 

The statement also said the funds so raised would have a three-year maturity and could be raised through loans as well as convertible and non-convertible debentures.

 

RBI said, “Startups can tap lenders and investors only from countries that are members of the Financial Action Task Force.”

 

If the funds were in rupees, the non-resident lender would provide it through swaps or outright sale through domestic banks.

 

RBI also advised start-ups raising money through ECB to have a risk-management policy as these would be exposed to currency risks because of exchange-rate movements.

 

Source: http://www.business-standard.com/article/companies/rbi-spells-out-rules-for-start-ups-to-raise-ecbs-116102701777_1.html

 

Foreign VCs can now invest in unlisted firms sans RBI nod

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Foreign venture capital entities can now invest in unlisted Indian companies without Reserve Bank of India approval.

The venture capital firm will, however, have to be registered with market regulator SEBI. The investment can be made in an Indian company in 10 specific sectors or in any start-up.

The central bank on Thursday amended the regulations governing foreign venture capital investors (FVCI) in order to further liberalise and rationalise the investment regime and to give a fillip to foreign investment in start-ups.

According to the RBI, the 10 sectors in which SEBI-registered FVCIs can invest without its nod are: biotechnology, IT, nanotechnology, seed research and development, discovery of new chemical entities in pharmaceutical sector, dairy industry, poultry industry, production of bio-fuels, hotel-cum-convention centres with over 3,000 seating capacity, and infrastructure sector. FVCIs can also invest in equity, equity-linked instruments or debt instruments issued by an Indian ‘start-up’ irrespective of the sector in which it is engaged. The RBI said a start-up will mean an entity (private limited company, registered partnership firm or a limited liability partnership) incorporated or registered in India not prior to five years, with an annual turnover not exceeding Rs. 25 crore in any preceding financial year.

These start-ups should be working towards innovation, development, deployment or commercialisation of new products, processes or services driven by technology or intellectual property and satisfying certain conditions as given in the Foreign Exchange Management Regulations, 2016.

The RBI also said FVCIs can invest in units of a venture capital fund (VCF) or a Category-I alternative investment fund (AIF) or units of a scheme/fund set up by a VCF or by a Category-I AIF.

In a circular issued to banks authorised to deal in foreign exchange, the RBI said: “In order to further liberalise and rationalise the investment regime for FVCIs and to give a fillip to foreign investment in the start-ups, the extant regulatory provisions have been reviewed, in consultation with the Government of India.”

The consideration for all investments by an FVCI can be paid out of inward remittance from abroad through normal banking channels or out of sale/maturity proceeds of or income generated from investment already made. There will be no restriction on transfer of any security/instrument held by the FVCI to any person resident in or outside India.

Source: http://www.thehindubusinessline.com/todays-paper/foreign-vcs-can-now-invest-in-unlisted-firms-sans-rbi-nod/article9247432.ece

Young entrepreneurs to get more funding from govt

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To support young entrepreneurs, the central government will launch ‘special funds’ for those in the 16-21 years and 21-26 years age groups.

“It’s on the drawing board. We have accumulated funds worth Rs 9,000 crore under the technology cess category, and we want to use this. We might launch incubation centres, innovation hubs and even funds. This country requires investments of Rs 10,000 crore annually if we want to give boost to entrepreneurship,” said Y S Chowdary, ministry of state for science & technology and earth sciences.

He was speaking on the sidelines of the 11th edition of Indian Science and Technology Entrepreneurs Park & Business Incubators Association (Isba) here on Saturday.

The fund will be over and above the Rs 10,000 crore fund-of-funds for start-ups announced by the government early this year.

Over the past two years, the funding to several government departments supporting incubation in India has seen a spurt. H K Mittal, advisor, Department of Science and Technology (DST), said that the support for incubators has gone up 10 times.

“DST’s finance has gone up by at least 4.5x to Rs 180 crore for FY17. Several of our programmes like ‘Power of Idea’, Eureka and Entrepreneur-in-residence have seen their fund corpus going up. Our seed support programme has gone up five times. We can now fund start-ups starting from Rs 50 lakh to Rs 1 crore,” he added.

According to Kshatrapati Shivaji, chairman and managing director of Sidbi, the idea behind creating the fund-of-funds was to give a push to domestic venture capitalists (VCs). “We have already committed Rs 800 crore across 19 VCs, which, in turn, will mobilise the investments.”

The event also saw the signing of the first Indo-US Joint Early Stage Fund with a corpus of $40 million. About 50 per cent contribution for the fund comes from incubators that come under Isba and India Electronics & Semiconductor Association and the rest of the funds will have contribution from high net worth individuals based out of the US and serial entrepreneurs such as Sanjay Sharma, CEO of Roambee Corporation. At present, Isba supports around 100 incubators across India.

NURTURING YOUNG MINDS

  • The Centre to launch ‘special funds’ for those in the 16-21 years and 21-26 years age groups
  • The govt has accumulated funds worth Rs 9,000 crore under the technology cess category, said Y S Chowdary, ministry of state for science & technology and earth sciences
  • Over the past two years, the funding to several government departments supporting incubation in India has seen a spurt
  • Government’s seed support programme has gone up five times. The Centre plans to fund start-ups starting from Rs 50 lakh to Rs 1 crore
  • The 11th edition of Isba (Indian Science and Technology Entrepreneurs Park & Business Incubators Association) also saw signing of first Indo-US Joint Early Stage Fund with a corpus of $40 million

Source: http://www.business-standard.com/article/companies/young-entrepreneurs-to-get-more-funding-from-govt-116091200303_1.html

Livspace raises Rs100 crore from existing investors

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Design and furniture start-up Livspace, owned by Home Interior Designs E-commerce Pvt. Ltd, has raised Rs.100 crore from existing investors Bessemer Venture Partners, Hellion Venture partners and Jungle Ventures, said three people aware of the development on condition of anonymity.

The firm, loosely based on US-based home design firm Houzz, was founded by Anuj Srivastava and Ramakant Sharma, former senior executives at Google Inc. and Myntra Designs Pvt. Ltd respectively, along with Shagufta Anurag, founder of architectural design consultancy Space Matrix.

The firm has already raised about $12.6 million in two rounds between December 2015 and August 2016 from Helion Venture Partners, Bessemer Venture Partners and Jungle Ventures.

Livspace co-founder Anuj Srivastava confirmed the development.

Livspace not only offers home interior design solutions and fulfils the order, it also sells furniture across categories such as living, dining and bedrooms. The company also runs a modular kitchen and wardrobe business.

The company has also acquired two start-ups in quick succession to fuel growth. The company acquired YoFloor, a mobile platform that offers a virtual trial room for home design in September 2015. In May last year, Livspace acquired Dwll, a curated online network of online designers. In March 2015, the company acquired DezignUP, an online community and marketplace for designers and consumers.

Livspace launched a home design automation platform, which will connect the designers on board with customers in real time and speed up the process of overall delivery, two months ago.

It essentially competes with the likes of Sequoia Capital-backed Homelane (Homevista Décor and Furnishing Pvt. Ltd), other than Urban Ladder Home Décor Solutions Pvt. Ltd, another Sequoia Capital portfolio and Pepperfry (Trendsutra Platform Services Pvt. Ltd), backed by Goldman Sachs Group Inc.

Urban Ladder, which has so far raised about $77 million from venture capital firms, and Pepperfry, the most well-capitalised online furniture store with about $128 million in its, initially started out by selling furniture. Both firms have, however, launched home interior solutions, modular furniture and kitchen in the last 12-15 months to compete with younger rivals such as Homelane and Livspace.

The investment in Livspace comes at a time when venture capital investment in India plummeted 58% in the June quarter over the previous three-month period, according to a report by KPMG and CB Insights, mirroring increasing investor caution towards funding start-ups.

VC firms ploughed $583 million into India in April-June, down from $1.4 billion in January-March, said the report. VC investments in India have been on a decline since October-December. Investments in the December quarter halved to $1.5 billion from $2.9 billion in July-September.

The online furniture segment has barely seen any big ticket investment in the last 12 months.

Among the bigger start-ups, Pepperfry last raised $100 million in July 2015, while Urban Ladder mopped up $50 million in April Last year. Urban Ladder raised debt capital of $3 million from Trifecta Capital, Mint reported on 24 August.

Source: http://www.livemint.com/Companies/1hDRCEVatp1asPhIuZXtuO/Livspace-raises-Rs100-crore-from-existing-investors.html