SeedFund : Big backing + tiny fund = giant impact

Google is taking an interesting partnership approach in India as to investing. The search giant has invested in two early stage or seed stage funds - Bangalore-based Erasmic Venture Fund (incubation fund) and Mumbai-based Seedfund. The amount of investment in both firms is undisclosed but are rumored to be small.

Apparently, India is the first country where Google has made a limited partner investment in early stage funds. These funds would essentially look at product innovations in consumer, Internet and mobile services.

The Seedfund has an interesting approach: They started with a group of people with hands on experience with startups in India and figured that the right amount of funding for an Indian startup wasn’t in the millions or in tens of millions of dollars range. It was closer to about $500,000. They also figured they could work closely with about 15 or 20 companies over the next 5 years – and hence arrived at a fund size of about $10 million.

That probably makes them India’s smallest VC fund; considering that the most fund sizes are in the $100M+ range. The founders of Seedfund describe their philosophy as:

In this market, money is cheap – but the right money makes the difference. We wanted limited partners that could add significant strategic value to our startups – and we’ve been lucky enough to end up with a dream team here too: institutions like Motorola Ventures, SVB Financial and others.

Google makes a great addition for sure.

Seedfund leverages the competitive advantage with the growing economy; especially if they are cross-border technology companies.

Considering that the valuation of these cross-border technology companies is getting at par with the similar companies in US, the Seedfund approach has a lot of potential.

Added: Just in case you are wondering as to how big is the VC industry in India:
In calendar year 2006, the total investment by domestic and foreign VCFs (venture capital funds) registered with the government has been pegged at nearly $3B. In 2006 the biggest gainer was the real estate sector, which witnessed investment of over $1B by VCFs and foreign venture capital investors. The IT sector (last year’s winner) attracted just about half of this, or $500M Similarly, venture capital investment in the services sector and industrial products stood at $250M and the pharma sector got nearly $200M in 2006.

One Response to “SeedFund : Big backing + tiny fund = giant impact”

  1. By Prescilla on Feb 27, 2022 | Reply

    Asian private equity market is booming for sure, although seed funding part is still lacking.

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