Venture Capital and Indian Entrepreneurs: A Reversal of Tides.
2 min read
A Conversation with a young entrepreneur & mid-size VC.
• 2015: Entrepreneur (Er): So what do you think about our business?
Venture Capitalist (VC): Looks great. We will sign the term sheet in the next week.
2 months later
Er: Hey ‘VC’, just a quick follow-up regarding our Term Sheet.
VC: Sorry ‘Er’ just had a discussion with the team & we would be going ahead with X (your competitor)
• 2021
VC: Happy to join your fundraising round 🙂
Er: Let me get back to you in a week with details about the same.
An eternity later.
VC: Hey ‘Er’, any updates?
Er: Sry v clad d and
Sent from my iPhone 13 Pro
Just kidding. The Entrepreneur was an android user.
The conversation might be a bit exaggerated, but the VC & startup space in India is on a mega bull run!
Every 2nd day we read stories of a company turning into unicorns. Companies raising Series A, B, C & this year we will also see our startups listing on Dalal Street!
According to a report by IVCA, VC was the most outstanding asset class for India in 2021.
Some eye-boggling numbers in 2021 :
- Unicorns: ~31*
- VC funds infused in 2021: ~$26 Bn (2x YoY)
- PE AUM: ~$31 Bn
Clearly, it’s raining ‘cash’ for startups & LPs. Essentially there are 3 ways a VC & PE firm can money by investing in startups :
- Exiting during follow on rounds, an advantage available to Early Stage VCs joining the Pre Seed & Seed funding Rounds.
- Acquisition by a Conglomerate or another fellow Startup.
- IPO, a recent phenomenon we are seeing with the listing of Zomato & now Paytm, Nykaa, etc.
- There’s also another option. A very unpopular one: Paying your investors back, with your revenues 😉
Okay, let’s not talk about our fantasies!
Amidst all the VC noise in our country with Tiger Globals and Sequoias and Softbank’s, there’s a unique investment firm operating in our country. Enter Faering Capital. What would be the best way to describe them?
A VC? A PE firm? I would say a ‘Boutique’ VC.
- AUM: ~$350 Mn
- Investments: ~26
- Employees: <15
Faering Capital was started by two old friends Aditya Parekh & Sameer Shroff in 2009.
Parekh….sounds familiar right?
What makes Faering so enduring is that it is headed by Aditya Parekh, son of Deepak Parekh the Founder of HDFC & probably the most influential figure in the Indian Financial Services industry. Faering has two funds with interests longing between Fintech, Insurance, NBFCs, new-age startups.
Some of their notable Investments :
- Fund I (Closed in 2010)
- RBL Bank – One of India’s Fastest Growing Bank
- City Union Bank – Market leader in Southern Markets
- NSE: Largest Stock Exchange of India, 80% Market Share.
- Mahindra Financial Services: Leading NBFC offering loans for a wide range of their vehicles.
- Fund II (Closed in 2016)
- Nykaa: Largest Beauty Lifestyle platform, going public in coming weeks.
- CAMS: Market Leader, transfer agent to India’s MF industry. Went public in 2020.
- Digit Insurance: Fastest Growing Insurance Aggregator.
- Finova Capital: Leading NBFC catering to MSMEs in India.
- Utkarsh Small Finance Bank: Fast Growing Small Finance Bank, IPO soon.
Farming has already had 8 very successful exits & all their investments are making a dent in the industry.
India is on track to receive $30 billion worth of VC investments from domestic and global investors in 2021. Indian young entrepreneurs have emerged as the ‘cool kids on the global investment stage, on the brink to further flourish and grow.
