Friday, August 21, 2015

ET survey: Why startups are raising seed capital from large VC firms - The Economic Times

By Evelyn Fok & Shonali Advani, ET Bureau  

Seed funding, typically the earliest investment in a startup, is no longer the territory of angel investors and dedicated seed funds. Stealthily, big-ticket venture capital funds that normally make large bets in startups are writing smaller cheques to younger companies as well, marking a tectonic shift in investment dynamics.

"Investors are playing across the entire funding continuum because nobody wants to miss out—the FOMO (fear of missing out) effect," said Sanjay Anandaram, venture partner at Seedfund and an adviser at software product think-tank iSPIRT. "These firms are able to seed the seedlings as they grow and cherry pick the ones that they really want to back with big bucks."

While venture capital firms in India have always invested seed money on occasion, a clear trend emerged in mid-2014 when a handful put in more than a dozen such investments. ET, in a survey conducted in collaboration with startup analytics firm Tracxn, found that institutional funds and angel investors now have similar leverage with entrepreneurs looking to raise seed rounds. Prior ET research found that in 2014 major VCs had closed more than 60 seed cheques of up to Rs 5-6 crore apiece. 


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