Towards the end of last year, a lot of investors were holding off on the free flow on funding that had been flowing in for startups for the rest of the year. But there are some like Kalaari Capital that are are not going to stop any time soon. Kalaari is busy nurturing and backing the next big ideas. Kalaari invested in online retailers Snapdeal and Myntra as well. The Venture Capital firm now plans to invest about Rs 135 crore in 40 early stage startups over the period of next two years as a part of its seed and incubation programme. This will be a new step Kalaari, which is more used to larger deals.
The VC firm, raised $290-million last year, but it did not invest in early- stage investments in 2014 and 2015. It has been focused primarily on series-A funding rounds of $3-4 million. Vani Kola, managing director at Kalaari Capital, has said in a statement:
“We didn’t do a single seed deal in the last 10 years, but we feel that there is a requirement and a gap in the market in terms of mentoring,”
In a recent announcement by RBI, it said that, it would ease regulations to allow startups to raise foreign venture capital using innovative tools like convertible notes to bolster entrepreneurship in India. These instrument functions as a debt that will automatically convert into preferred stock on the closing of series-A fundraising, avoiding stock dilution when a startup is still in the validation phase. Convertibles are typically used by accelerators, angel investors or seed-stage funds like India Quotient, but are rarely employed by large, Indian VC firms. Kalaari has also roped in former Cisco chief technology officer Padmasree Warrior and Airbnb’s global expansion head Varsha Rao to mentor startups that it will invest in under its seed investment programme, KStart. The programme will be launched on February 05, 2016.
KStart will have a new batch every quarter of up to five startups. Experts say that even as venture capital activity at the seed funding level has picked up, the number of startups likely to be able to secure follow-on funding will remain low, posing higher investmen risk. To minimise this risk, Kalaari said it will have an option to invest up to 50% in new funding rounds being raised by its portfolio companies. Kalaari is working on tie-ups with global technology majors and a large plug -and-play workspace next to its office in Bengaluru’s Whitefield.