Arkam Ventures, earlier known as Unitary Helion, a Bangalore-based venture capital firm, today announced the first closure of Rs 325 crore of its early-stage technology fund of Rs 700 crore.
The fund’s Rs 325 crore in commitments from global institutions, family offices, and individual investors include a large US-based institutional anchor investor, a US-based global fund of funds Capria, SIDBI (Small Industries Development Bank of India), prominent family offices in the US and India, and unicorn founders Binny Bansal (Flipkart), Vijay Shekhar Sharma (Paytm), and Rajesh Magow (Makemytrip), among others.
Led by BITS Pilani alum Rahul Chandra and Bala Srinivasa, who have rich experience in venture funding, Arkam’s investment thesis is based on backing entrepreneurs who are innovating for what they call Middle India — 400 million people just below the top of the pyramid.
Speaking to YourStory, Bala said, “The big reason for us to even do this fund is because of our joint belief that there is a very large opportunity in being focused on what we call the next 400 million market. We think there is something special about Middle India.”
Defining middle India as the segment of people with family income between Rs 3 lakhs and Rs 20 lakhs a year, Bala said, “What we are really looking for are founders who are building products specifically designed for this market and who have efficient new business models.”
The core areas of focus for the fund include financial services, healthcare, food/agri, and mobility, which, Bala states account for 70 percent of wallet share of Middle India.
For its first fund, Arkam will invest in 15 to 18 startups with a focus on Series A and Series B investments with initial investment sizes in the Rs 15 crore to Rs 30 crore range.
The venture fund’s earlier investments have been in fintech startup Krazybee and supply chain and logistics startup Jumbotail.
Krazybee, a digital lending startup, is focused on the next 400 million market and has scaled to over two million customers, sourced and serviced completely by its mobile app. Jumbotail provides a digital marketplace and supply chain solutions for kirana stores and has grown to service over 20,000 kirana stores in Bangalore.
Arkam is in the process of closing three additional deals in the agri and fintech spaces.
The COVID-19 crisis is already creating behavioural shifts in consumers and businesses. Bala believes it is the right time for disruptive startups to take this opportunity to build large businesses with strong economic and social impact.
“Sometimes it takes a crisis like this to accelerate change. These are tough times for startups and for everybody but we just think that on the other side of this there will be significant momentum in certain sectors and we feel good about the ones we are in,” he said.
Interestingly in the COVID-19 induced lockdown, all the fund’s four core sectors — financial services, healthcare, food/agri, and mobility — have seen the maximum disruption.
“For example, in five to seven years from now, you might see half the number of bank branches that you see today. Banks are getting used to the fact that certain things can be done digitally whether it is onboarding customers, risk assessment, or even servicing customers, it can all be done digitally,” Bala said.
In healthcare, until recently, there were certain regulations around video consultation in India. Those are being relaxed now. “The momentum behind having digitisation of healthcare even in hospitals where because of physical distancing there are going to be changes to the way people queue up or take appointments, these are all tailwinds which would have not existed before,” he said.
Stating that the partners have been fortunate with their anchor investors, Bala, who was earlier Partner at Kalaari Capital, said, “They, like us, believe in and see our passion for the Middle India thesis and we are fortunate to have several Indian founders and family offices who have put in money.”
The announcement of the fund brings in a ray of sunshine for the Indian startup ecosystem that has been deeply affected by the COVID-19 crisis. In its recent report, Nasscom had stated that as high as 40 percent of startups have either temporarily shut down or are on the verge of closing.
The momentum of funding also remains sluggish with the focus largely on early-stage deals. Though the first week of June seemed to have done better as compared to the last week of May. According to YourStory’s weekly funding report, “Funding into Indian startups for the first week of June stood at $92 million as compared to $50 million last week.”
“Our first fund is backed by some of the sharpest investors and founders in the world. The venture ecosystem values our past investment experience of partnering founders from seed stage to IPO. We recognise that exits, especially IPOs, are rare in India and we are excited to bring this experience to our portfolio,” Rahul said in a press statement.
Rahul was Co-founder and Managing Director at Helion Ventures.
The press statement quoted Paytm’s Vijay Shekhar Sharma, an investor at Arkam, as saying: “The Arkam team brings rich experience in India VC investing. Over the past 15 years, they have shepherded many startups from foundational to high-growth phases, including IPOs. This is an invaluable experience for founders as they navigate the inevitable highs and lows of the entrepreneurial journey. Any new startup should look forward to leveraging this learning for sustained success.”
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