Micro-VCs Find Stable Foundation as the Venture Landscape Reshapes

Nitin Konde, Apoorva Bajj

Aug 20, 2024 — 2 min read

Micro-VCs Find Stable Foundation as the Venture Landscape Reshapes

Former head of enterprise software and AI investments at Venture Highway (now part of US-based General Catalyst) Aviral Bhatnagar has established an INR 100 crore fund to support early-stage Indian companies. He told a media outlet that the newly formed venture capital (VC) business AJVC's fund would be sector neutral and just invest in pre-seed stage companies.

This news arrives as India is seeing the launch of a slew of new micro venture capital (VC) firms and domestic funds. Although they write smaller checks than more established VC companies, these investors support entrepreneurs from the very beginning. Micro VC funds, which are often smaller and concentrate on one partner, have emerged, increasing the diversity of risk capital investing in Indian entrepreneurs.

Additional well-established micro VCs include Better Capital, run by Vaibhav Domkundwar; Java Capital, which focuses on deep tech; Sauce VC, based in Delhi, which invests in the consumer sector; and Neon Fund, which focuses on business software and has a $25 million target.

Establishment of AJVC

The inspiration for AJVC came from Bhatnagar's 2018 platform, A Junior VC, which he established to shed light on the startup and VC scene in India.

All of the firm's efforts are directed at pre-seed investments. As a tech-driven, fast-moving, and approachable organisation, he predicted that an opportunity will arise to establish an institution that invests in pre-seed stages.

He stated that younger investment firms are finding more opportunity to take riskier bets as larger venture capital firms become more cautious when investing in startups.

A number of more established venture capital firms have begun to consider investments more in the vein of private equity, which opens the door for upstarts to take more calculated risks... "I strongly believe that innovation is here to stay," Bhatnagar stated.

Future Business Operations

Funding for AJVC has come from family offices, wealthy individuals, and prominent Indian startup founders, according to Bhatnagar. Though he plans to start assembling a team in the future, Bhatnagar, who attended both the Indian Institute of Technology (IIT) in Bombay and the Indian Institute of Management (IIM) in Ahmedabad, has stated that for the time being he will operate the firm as a single partner.

Within the next three to four years, the venture capital firm—which has been approved as a category II alternative fund by the Securities and Exchange Board of India—plans to invest in more than 30 firms. While AJVC will initially only participate in pre-seed rounds, Bhatnagar did not rule out future rounds of follow-on funding in the event that the firm is successful.

This year, six innovative companies—Go Digit, Awfis, Ixigo, Ola Electric, FirstCry, and Unicommerce—took to the public markets.

Startups will be more appealing as an investment "Because of the elimination of angel tax and the rationalisation of long-term capital gains tax to 12.5% for unlisted securities," Bhatnagar stated.