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500 Startups may revive plan to raise India fund this year

LiveMint logoLiveMint 22-05-2017 Anirban Sen

Bengaluru: Silicon Valley-based start-up fund and incubator 500 Startups, which has invested in over a dozen early-stage Indian start-ups over the past four years, may revisit its plans to set up a separate India-focused fund later this year and is not putting its India investment strategy on hold, a top company executive said.

In January, 500 Startups had said that it was putting its plan to raise a $25-million India-focused fund on hold due to regulatory and tax issues. However, the seed-stage investor is not pulling out of India and has continued to make investments in Indian start-ups through its global fund, said Shalini Prakash, who leads investments and strategy for 500 Startups in India.

“Maybe at some point later in the year we will think about (the India fund)—it could be 3 months or 6 months or 9 months from now,” said Prakash in an interview.

“But I don’t think we’ll be rushing into anything right now...We just want to make sure that we’re supporting our founders’ network very well and we want to ensure that they’re getting what they want. We want to keep looking for interesting companies and keep investing in India—that’s our focus right now. But hopefully at some point we will re-think and start the conversation on how we want to do more in India,” she said

A separate fund would allow 500Startups—which was launched by veteran Silicon Valley angel investor Dave McClure in 2010—to do more seed-stage investments in India. Since December, 500Startups has invested in at least seven early-stage Indian start-ups through its global funds, including Spoyl, an online marketplace for pre-owned apparel, and Niramai, a healthcare-tech venture.

The fund has also just closed an investment in Internet-of-things start-up Stellapps, alongside other investors such as Flipkart co-founder Binny Bansal and Blume Ventures.

“The only reason the fund would be more interesting for us is because we can do more investments in India. With a $25-million fund, we would look to do at least 100-150 companies in a matter of a few years,” said Prakash, who has also worked with Kyron Accelerator and GSF Accelerator in the past.

500 Startups hopes to invest in at least a dozen start-ups by the end of the year, and is closing “at least one deal every month”, said Prakash.

So far, 500 Startups has backed at least 16 early-stage start-ups in India over the past 3-4 years, including start-ups such as payments venture Instamojo. The Silicon Valley-based investor has also got exits from five Indian start-ups till date, including ZipDial, which was acquired by Twitter in 2015.

“We did an investment in December—we were feeling really bad that we were missing out on so much in India because there was not too much that we did last year, since we were raising the fund,” she said. “We are on our way to close almost seven (investments)—hopefully all of them will close by the end of this month. We typically do up to $150,000 with the first cheque, after which there may be follow on investments.”

Globally 500 Startups has invested in over 1,000 start-ups. Its first investment was in July 2010 in a social marketing software company called Wildfire which was later acquired by Google for $350 million. In an interview in February 2013, McClure had said that 500 Startups typically gets successful exits from about “10-20%” of its portfolio companies.

Prakash also clarified that tax issues were not the only reason why 500 Startups had put its India-fund plans on hold last November.

“Tax issues were not the primary reason—we also sort of wanted to re-look at our strategy for India. While those conversations (at the time) were going really well, there was also a lot of uncertainty at the time, what with Brexit and the Trump election. So, we thought there was no rush in setting up the India fund—we wanted to figure out the strategy (for India) because all the investments that we’ve made in India so far have come from our global fund. So, we decided to continue doing what we were doing in India and figure out how we want to re-start India..because the goal is to do more in India, no matter what channel it comes from,” said Prakash.

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