India not deep enough market for large Series A rounds: VCCircle LP Summit

By Priya Prasad

  • 21 Feb 2018

Venture capital activity in India, particularly at the Series A level, hasn’t changed much even though the number of angel investors has risen in recent years, top industry executives said at the ninth edition of the VCCircle India Limited Partners Summit 2018.

Participating in a panel discussion at the event in Mumbai, the executives also said that these were still early years for venture capital firms and entrepreneurs in India and that the startup ecosystem had yet to mature.

“Though the ecosystem has grown, I believe we need more Series A, B and C funds,” said Rehan Yar Khan, founder at Orios Venture Partners. India also needs more general partners, he added.


Rajesh Raju, managing director at VC firm Kalaari Capital, concurred and said it was difficult to raise large Series A funding rounds in India because the market was not deep enough.

“There has been a squeeze at the Series A and B stages. Not much has changed at the Series A stage. It is difficult to make out if a company can go to Series B or C. The number of investors who play at that stage has reduced,” said Raju.

Kirill Kozhevnikov, partner and managing director at Russia-based Sistema Asia Fund, said his fund only invests at the Series B stage as few investors are putting in money at this stage. The fund has made eight investments in the country over two years, he said.


Kozhevnikov also said that, besides angel investors and private equity players, new sources of money flow had opened up. These include crowdfunding, initial coin offerings and funding by corporate houses.

Risk factors

Some panellists highlighted a number of risks investors should watch out for in India.


Kaushik Anand, head of investments in India at Capital G, the venture capital arm of Google, said the major macro risk India faces is an expectation mismatch. “Expecting India to grow at the rate of China is unrealistic,” he said. Figuring out exits in India is challenging, too, he said.

Blume Ventures managing partner Sanjay Nath said that, while the quality of entrepreneurs had improved, many founders were obsessed more about raising funds and not about their products.

Kozhevnikov said he had let go some overpriced investment opportunities. “Though we were bullish on certain sectors, we passed on three opportunities because of an inflated market,” he said. But he added that there have been some down rounds of late, which was good for the industry. A down round refers to a company raising funds at a lower valuation than before.


For Khan, lack of capital is the biggest risk the Indian market faces. “The withdrawal of Tiger Global has created a huge vacuum,” he added.

The second biggest risk, said Khan, is the massive overvaluation in the public markets. “When this crashes, the sentiment across the board will be affected,” he added.


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