Venture Capital: Seed-stage deals are sprouting even in Covid drought

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    NEW DELHI: A clutch of well-known venture capital firms that invest across stages, have been seeing a steady, if not an uptick, in flow of seed funding transactions, even as the broader deal-making pace in the Indian startup ecosystem has slowed to a crawl due to the Covid-19 pandemic.

    WaterBridge Ventures, Chiratae Ventures, SAIF Partners and Orios Venture Partners — four venture capital firms that make early-to-growth-stage investments — have continued to pursue seed-stage deals over the last two months, when most investors put away their cheque books in the wake of the virus outbreak.

    “The deal flow has been phenomenal. We are planning to announce up to six deals, which are currently in the shareholders’ agreement or term-sheet stage, over the next couple of weeks. All of this has happened in the last 20 days,” said Manish Kheterpal, managing partner of WaterBridge Ventures. This comes after WaterBridge Ventures launched its Fast Forward program, an entirely online process that has been set up with a $10 million commitment from its second fund to make seed and pre-Series-A rounds in early stage startups.

    “As compared to doing growth-stage deals, in seed transactions, if you have a strong sector thesis and a well thought through process, the entire journey, including due diligence, can be undertaken remotely,” Kheterpal said.

    Separately, Deepak Gaur, managing director at stage and sector-agnostic investment firm SAIF Partners, also said the firm had been fairly active during the lockdown period, and had, since the first week of March, signed six new seed and Series A term sheets.

    Orios Venture Partners has also continued to see a steady deal flow, it said. This uptick comes amid Series-A investments dropping by at least 30%, depending on the sector, with consumer-facing investments bearing the brunt, according to investors.

    According to data collated by Tracxn, there have been 36 Series A investments in the April-June year-to-date period, totalling $238.5 million, compared to 56 transaction in the January-March quarter, totalling $270 million.

    The VC firms, which invest across stages but also have an active focus on seed transactions, are now increasingly focusing on very early-stage companies, more so in specific sectors such as health-tech, Software as a Service and ed-tech, as they believe these segments are more defensive plays, given the current environment.

    “For instance, over the past three months, we have focused a lot more on segments such as deep-tech, which we believe will have much less sensitivity in a Covid-19-led crisis, at least in the medium term,” said Karan Mohla, partner at Chiratae Ventures, a top-tier VC firm which counts home grown unicorns such as FirstCry, Lenskart and PolicyBazaar among its portfolio.

    “Undoubtedly, whatever we look at, the lens is going to be a bit more conservative…The first tendency is to look at counter-cyclical, defensive sectors. The bar is going to be very high for sectors that are at the frontline of being impacted by something like Covid-19,” Mohla said.

    The pandemic has ensured, at least for the medium term, a keener sector focus, with some that were seen as investor favourites now on course to lose that status.





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