Venture Gurukool, a platform established to assist early-stage startups, is planning to launch its first fund called VG Coop Fund with a target amount of $20 million until the end of April, said Mahendra Swarup, founder of the entity.
The fund will include a greenshoe option to raise another $20 million, will be used to invest in business-to-business and consumer technology start-ups. According to Swarup, the company will collaborate with three large Chinese investors who will be co-investing with Venture Gurukool.
“We are floating a small fund, where we will first identify such ventures that have similar successes in China. The Chinese only want to invest in spaces they are familiar with and they have had successes in China itself. The idea is not only to fund Indian start-ups but to build great businesses based on successes overseas which are pre-aligned with strategic partners/investors, ensuring a clear path to exit,” said Swarup who was a managing director with India-focused private equity fund Avigo Capital.
VG Coop Fund’s investments will come as seed funding and be complemented by large Chinese strategic investors and venture funds as pre-series and series A investments.
“We will initially provide seed funding and Chinese investors will come in for pre-series and series A. The model is that we will invest in start-ups which are mirroring businesses which have succeeded in China,” said Swarup.
VG Coop Fund is willing to use between 60-70% of its funds in the domestic market while the rest will be used in other Asian countries such as China, Taiwan, South Korea and Indonesia. Swarup believes that most future massive investments in India will come from China and not the US or Europe.
“China has almost seen a saturation point and so they are looking at large markets. China is all about scale… Chinese investors find India as the only other market where the market can scale up,” said Swarup.
“India is a natural partner for China because of the size of the market, similarity in demographics and consumer behavior, and the presence of opportunities to scale up on the back of increasing mobile penetration,” he added.
According to him, the Chinese investors are attracted to India because of the two countries similar demographics and consumer behavior. Investors from China such as Alibaba, Tencent, and Fosun are already spilling the cash in Indian startups and this trend is surely on the rise.
VG Coop Fund now joins the rank of a string of domestic funds dedicated to financing innovative and full of potential startups in India. Earlier this week, equity crowdfunding platform 1Crowd announced its first close deal in a debut angel fund at Rs 23 crore. Fireside Ventures, Stellaris Venture Partners and pi Ventures among others are additional domestic funds that have recently hit the funding market.
Venture Gurukool mention on their website that unlike typical incubators or early stage venture fund, they ‘embrace a startup for a longer time span, ranging from 3 to 7 years.’ Their aim is to provide the startups they invest in with handful support through the ups and downs of their business endeavors. Their goal is to get the startup through the first phase which is when the company has developed a finished and top-quality product which will generate money on a large scale. It is only after this process that Venture Gurukool will introduce the company to its network of investors and strategic players both nationally and internationally.