Aviral Bhatnagar, who previously led enterprise software and artificial intelligence investments for Venture Highway (now merged with US-based General Catalyst), has launched a Rs 100 crore fund to support early-stage Indian startups. The fund, launched by new venture capital (VC) firm AJVC, will focus entirely on pre-seed stage investments while being sector agnostic, he told ET.
This development comes at a time when several new domestic funds and micro venture capital (VC) firms have come into India. These investors support early-stage startups and write smaller checks than established VC firms. The emergence of micro VC funds, which are typically small and single partner focused, has increased the diversity of venture capital investments in Indian startups.
Other established micro VC firms include Vaibhav Domkundwar’s Better Capital, deeptech-focused firm Java Capital, Delhi-based Saas VC, which makes consumer sector investments, and the $25 million enterprise software-focused Neon Fund.ETech
AJVC is modeled after A Junior VC, a platform launched by Bhatnagar in 2018 to provide insights into the Indian startup and venture investment ecosystem.
“The firm is exclusively focused on pre-seed investments. “We see an opportunity to (invest in) building an organization at the pre-seed stage, and it’s a fast, approachable, technology-driven organization,” he said.
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As big venture capital firms take a safer route to investing in startups, opportunities are opening up for young investment firms to take riskier bets, he said.
“Some of the larger VC firms are starting to look at more private equity-style investments and that creates an opportunity for some new firms to take riskier bets…I don’t think innovation is going away,” Bhatnagar said.
In June, the newly appointed Venture Capital Council of the Indian Venture and Alternative Capital Association (IVCA) made growth of micro VCs one of its proposed focus areas.
Prashant Prakash, co-chairman of VC Council, IVCA, said at the time, “The VC landscape has also proliferated with the emergence of a new generation of micro VCs to drive the growth of India’s entrepreneurial ecosystem. By empowering first-time fund managers with knowledge of key strategies in fundraising, capital deployment, portfolio monitoring, governance and reporting, we can take India’s startups to new heights.
AJVC has raised capital from family offices, high-net-worth individuals and founders of large Indian startups, Bhatnagar said. An alumnus of Indian Institute of Technology Bombay and Indian Institute of Management Ahmedabad, Bhatnagar said he will run the firm as its sole partner for now but will eventually start building a team.
The VC firm, which has been approved as a Category II alternative fund by the Securities and Exchange Board of India, will look to invest in over 30 startups over the next three-four years. While AJVC will only launch pre-seed investments, Bhatnagar did not rule out pursuing investments at later stages if the startup is successful.
“We see a much bigger opportunity for Indian startups… and as the market gets bigger the pace for companies to scale to unicorns will be much faster. Other positive signs are emerging from big M&As and IPOs, which point to an exit path,” Bhatnagar said.
Six new-age companies have tapped the public markets this year – Go Digit, Awfis, Ixigo, Ola Electric, FirstCry and Unicommerce.
“Rationalization of long-term capital gains tax to 12.5% for unlisted securities and removal of angel tax will make startups more attractive as an asset,” Bhatnagar said.