India’s venture capital firms are finding that leaner might be better
Subscribe to enjoy similar stories. On Thursday, early-stage venture capital firm Stellaris Venture Partners launched its largest-ever investment vehicle—a $300 million fund. The fund was heavily oversubscribed, but the firm’s partners decided not to raise more than this.
This $300 million corpus, according to Stellaris partner Alok Goyal, is the right size for deploying over the next 4 years in India’s seed-to-series A startup funding ecosystem. Similarly, Blume Ventures, which has invested in prominent Indian startups including Battery Smart, Purplle and Unacademy, doesn’t plan to increase the corpus for its next two funds, maintaining them at about $290 million, the venture capital firm told Mint in October. Peak XV also echoed similar sentiments when it slashed its $2.85 billion India and Southeast Asia fund by $465 million to reduce its cost of capital.
A key reason for this: insufficient opportunities for Peak XV’s growth strategy. A few other VC firms looking to launch their next fund have a similar strategy or plan only a slightly bigger corpus, reflecting more tempered expectations of Indian startups. Several venture capital are sitting on sizable dry powder—capital yet to be deployed—as they have become more diligent on which startups to back.
“The driving reason for fund sizes being scaled up or down is always based on past performance. Funds raised in 2013-14 with two extensions and a grace period of 1 year are ending in 2025 as no further extensions are possible and LPs (limited partners) are demanding exits," said Anup Jain, founding partner, BlueGreen Ventures. Limited partners are investors in venture capital firms, which are expected to return the investment and profit to their LPs at the end of a fund
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