VCCircle

Seedfund launched its operations on Thursday. The early stage fund will have a corpus ranging from Rs 45-60 crore, and the money has come in from a host of institutional investors like Motorola Ventures, Reliance Capital and SVB Financial Group, Sierra Ventures and individual investors like Kanwal Rekhi, K B Chandrasekhar, B V Jagadeesh and Sridar Iyengar.

The fund will make investments upto $500,000 in a venture. The fund's managing partners are Pravin Gandhi and Bharati Jacob (ex-Infinity Venture Fund), and Mahesh Murthy (ex-Passionfund). They will be based out of Mumbai and Bangalore (looked after by Jacob).

Where will the fund invest? Jacob said in a statement: "Over the next few years, we hope to pick about 20 companies to invest in, and the sectors that interest us are consumer media and technology, internet, mobile, retail and other high-growth sectors."

It's a great initiative. All the best to the team.

By the way, here is a discussion on Seedfund and Mahesh Murthy.

India's (probably) smallest venture fund is being launched on November 30. That's how the press invitation from the PR firm of Seed Fund reads. It's not clear what is the size of the fund. Earlier, Mahesh Murthy, one of the partners of the fund, had gone on record that they were raising $10 million.

If that is the size of the fund, it will not make Seed Fund the smallest VC firm. Bangalore's Erasmic Venture Fund (EVF) could be the smallest with $7 million in capital.

Seed Fund has four partners - Pravin Gandhi, Mahesh Murthy, Bharati Jacob, and Paula Mariwala. All of them were VCs with various funds earlier. They are not going make a lot of money as management fee from this fund (usually 2 per cent of the fund a year), so I am sure they all do something else for a living. Murthy runs Pinstorm, a search engine marketing company, which is believed to be making loads of money.

The fund is expected to have investors like Kanwal Rekhi, K B Chandrashekhar and so on. Anyways, we will wait for the official announcement on this. They would also be announcing a couple of investments the fund is making.

This is the second publicly announced investment by Band of Angels India. The Delhi-based angel investing group has invested an undisclosed amount in Sanshadow Consultants, a Delhi-based intellectual property research company, in return for a 20-30 per cent stake. Sanshadow Consultants is set up by IPR consultant Shaleen Raizada. She was consulting Samtel Industries on IPR issues and has worked with Sun Pharmaceuticals, and also as a Senior Scientific Officer at the Patent Facilitating Cell at Technology Information Forecasting and Assessment Council (TIFAC), a government body.

The investment has been led by four or five individual investors at the Band of Angels, whih include Mohit Goyal and Saurabh Srivastava. The group has bet on Sanshadow since it's positioning itself as a KPO firm with a consultancy offering. BoA had earlier invested in hotel management software company Knowcross, set up by an ex-venture capitalist Nikhil Nath.

BoA is believed to have shortlisted or invested in another three or four companies.

This is the age of entrepreneurs who retrofit their businessplans and funding requirement based on a VC's minimum investment amount. Very few are looking at building businesses with minimum capital even though it can be done. Maybe VCs are not looking at capital efficient businesses.

So Ram Shriram, one of the earliest investors in Google, had this to say at the ongoing Web 2.0 Summit in the US:

“I’d rather see start-ups scrappy and frugal and on a diet of Ramen noodles.”

According to him, one is not going to get YouTube kind of exits always. So it's important to be frugal from the beginning.

(Via VentureBeat)

Singapore-based Upstream Ventures is launching a new $80 million Pan Asia fund that will invest in early stage ventures in in India, Singapore and China. It intends to fill the gap for early stage funding in sectors such as Internet, new media, wireless and telecommunications; IT software and solutions; and semiconductors in these geographies. The fund is aiming for a first close later this year.

VC Circle spoke to Pierre Hennes, a partner at Upsteam Ventures and one who is focused more on Indian venture investing, about the new fund and how he views India.

Tell us a little about Upstream Ventures

Upstream Ventures was established in 2003 in Singapore to manage a family fund of early-stage investments. Recognizing the emerging opportunities for technology and investment in Asia, the firm’s founder, Carmelo Pistorio, assembled a core team of professionals committed to the vision of transforming the group’s opportunistic angel activities into a structured Venture Capital firm. An early trade sale from the angel portfolio served to further build the current investment portfolio and fund the growth of the management company, which today includes an expanded team of operationally-focused investment professionals spanning Singapore, China and India.

Over the past several years, Upstream Ventures has developed a strong global network with a particular focus on China, India and Singapore. The network spans research institutes and incubators, multinationals, venture capital and private equity firms, professional associations and academia. The firm has also attracted experienced, highly-respected entrepreneurs and experts from industry, venture capital and higher education to its International Advisory Board.

Today, Upstream Ventures provides early-stage venture capital funding, expertise and networks to emerging companies across Singapore, China and India. Upstream Ventures backs outstanding teams that have the vision and discipline to build high-growth innovative enterprises targeting Asian and global markets.

You plan to raise a new early stage VC fund for funding opportunities in China, India and Singapore. What is the size of the fund and when do you plan to close it?

The Upstream Asia Enterprise Fund is a $80 million closed-end fund for investment in early-stage companies in Singapore, India and China. The fund has secured commitments from its anchor investors and is in discussion with a number of qualified prospective investors, aiming for a first close later this year.

What type of opportunities are you looking to invest from this fund? What will be the range of investments?

The fund will invest in early-stage companies in China, India and Singapore and anticipates initial investments of $500,000 per company. Total commitments per company are limited to $5 million staged in up to three rounds of funding. The fund will invest in companies with core technologies, devices and applications in fields such as: Internet and new media; wireless and telecommunications; IT software and solutions; and semiconductors.

Is this the first time you are looking to invest in India? How do you see the opportunities here?

The fund’s investment managers have several years of direct investment experience in India. With a high concentration of the world’s manufacturing and services, Singapore, China and India are now increasingly a locus of global research and development. The region continues to lead in economic growth, driven in part by large populations of highly educated and trained professionals, many returning from overseas as entrepreneurs with deep industrial and scientific experience. India and China also have sizeable domestic markets and rapidly growing middle classes driving demand. The fast growth in demand from consumer and enterprise markets, and a new generation of homegrown technologies are increasingly re-shaping Asia’s economies, making Asia the center of venture activity.

Not surprisingly, the region’s private equity markets are attracting large inflows of foreign investments. These funds, however, remain still essentially focused in late stage, mezzanine and buyout deals, creating an urgent need for funding and expertise available for early-stage ventures.

I think there is a clear lack of early stage financing in India. However there could be risks and challenges in investing at that stage. How do you view this?

Strongly agree. There is a tremendous amount of committed capital that will be unleashed in India over the coming 24 months. However, many of these funds are too large ($100 million-plus), and will be forced to commit larger amounts of capital per investee company, driving valuations (and the entrepreneur’s expectations and confidence) higher. Startups in India talk of the $250K gap, while VCs will be trying to shove millions down the entrepreneurs’ throats. There are very few smaller sized funds (<$30 million) operating – and these will be the funds to benefit from the higher valuations, so long as we move fast and catch the entrepreneur early.

Those very early-stage VCs that instill good governance practices, build strong management teams and help investees achieve traction early-on will establish a good reputation among the larger funds, becoming trusted sources of deal flow (for which they will be willing to pay a premium). We will mitigate our investment dilution risk by following on initial investments with up to $5 million total exposure per company.

With a $80 million target fund size spread across Singapore, India and China, we address the gap for early-stage funding. Our cross-border approach offers a competitive edge to the early stage venture by bridging the best of these three ecosystems. Furthermore, it allows us to select the best opportunities across all three countries while benefiting from geographical diversification.

What do you like about India now?

India is on fire. Improved infrastructure and the loosening of financial controls are spurring investment. Everything mobile-related. Leveraging the existing service base to move into products – for the home market and abroad. Bridging and tapping the digital divide. The excitement of e-enabling the populace. The FTA with Singapore. Growing trade with China. Emergence of Tier 2 cities. Highly educated populace. Hungry entrepreneurs.

Alok Mittal of Canaan Partners informs that they - in association with TiE, INSEAD and Evalueserve - is organising "Entrepreneurial Challenge". It's a sort of business plan competition for startups and early stage businesses who are looking to scale up to the next level. The winners will be mentored, and also sent to the INSEAD campus in Singapore for a session. The entries have to be submitted through Canaan and TiE New Delhi websites between November 1 and November 15.

Alok Mittal has more details here.

Y Combinator is a US-based seed investment firm who invests at a very early stage in people with ideas only. The startups don't even need to have a businessplan but just a team of co-founders and the idea. India definitely needs such very early stage firms.

Sanjay Bhargava, a startup evangelist and a blogger at VentureWoods.org, plans something like that of Y Combinator if there is enough interest. Read his post here.

It looks like a sort of incubation fund from the Tata group. Tata Industries is looking at picking up anywhere between 10 per cent and 26 per cent equity (or more in the later stage) in companies or startups that work in the emerging areas of technology. The group plans to invest upto Rs 1,000 crore in these ventures.

In an interview to Business Standard, Kishor Chaukar, Managing Director of Tata Industries Ltd, said that they would fund several companies ranging from an investment of Rs 5 to 15 crore for the next 5-10 years, so that there would be at least three or four of them which could be scaled up as mega businesses.

The Tatas have chosen such areas as alternative medicine and materials, non-conventional energy, agricultural inputs, biotechnology, and healthcare to focus on. They could invest in a company at any stage - even at the concept stage of a product. [Via Business Standard]

Clearstone Venture Partners has announced the opening of its advisory office in Mumbai. The office will be headed by Rahul Khanna, who will identify and support portfolio companies. Clearstone had recently invested $5 million in Indiaideas.com, which owns the bill payment company Billdesk.

The sectors Clearstone will focus on in India include telecom, media, entertainment and financial services. It has $650 million of committed investment capital. Most recently, they raised $200 million.

Clearstone Venture Advisors Pvt. Ltd., located in Mumbai is Clearstone's independent advisor on the ground in India. This office will develop and extend the firm's Indian entrepreneurial networks, evaluate new companies for investment consideration, and supervise Clearstone's interests in active portfolio companies.

Go to press release.

Leading Indian media group TV18 is planning a Rs 50 crore ($11 million) venture fund to invest in Indian media startups - essentially in the triple play area. The company has informed Bombay Stock Exchange that it's seeking to form Media Venture Capital Trust that will invest in early stage ventures in the media space.

The company had recently acquired a Mumbai online ad agency Urban Eye. It has also funded Yatra Online, a travel portal, besides picking up 50 per cent stake in Jobstreet India, the jobs portal.

ContentSutra has details.