Dave McClure’s 500 Startups launches $25m ‘Kulfi fund’ for India

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After 500 Kimchis for Korea, 500 Durians for  Southeast Asia, and 500 TukTuks for Thailand, it is now time for the ‘Kulfi’ fund.

US-based accelerator and investment fund 500 Startups Tuesday announced a new $25 million to focus on India including Sri Lanka and Bangladesh.

Christened as 500 Kulfi, this will be focusing on early-stage companies with product-market fit and demonstrated traction.

500 Startups, the seed fund founded by Dave McClure, also announced a new fintech fund of similar size. About 30-40 per cent of the new fintech fund will be invested in markets outside of the United States, the company said.

The Silicon Valley-based venture capital firm, which was among the most active investors in Asia, in terms of deal volumes in Q4, 2015, has a track record of launching micro-funds that have a distinct regional flavour.

Sweet like ‘Kulfi’

The Kulfi, a popular frozen dairy dessert traditional Indian Subcontinent ice cream popular across India, Pakistan, Bangladesh, and widely available in Indian restaurants today. It is as unique to the Indian subcontinent as Kimchis to Korea/Japan, TukTuks to Thailand, while the Durian is a favourite fruit across Southeast Asia.

The Kulfi India fund will be sector-agnostic, but the early-stage venture firm will take a close look at fintech, edtech, health and wellness, data analytics, content and SaaS/SMB, it said.

Highlighting the importance of Indian market, the company further said, “As Walter Thompson (500 Startups Journalist-in- Residence) recently noted, private equity investment activity in India was up 67 percent from 2014 to $21 billion. GDP is expected to grow at 7.6 percent this year, faster than any other large global economy.”

India’s attractiveness to both VCs and other investors stems from the fact that the country boasts of a vibrant startup ecosystem, has the second largest Internet population in the world after China, with more than 300 million users, while the number of smartphones users is set to 700 million by 2020.

It is also a young country, and demographics are a huge added advantage, when compared to aging populations in the West and even in China.  The median age in India is 27.3.

500 Kulfi will investment in between 25-50 deals a year, slightly higher than the average rate they have had.

The new fund will also invest in startups located in Bangladesh and Sri Lanka.Some of its investments include  ZipDialSourceEasy, InstamojoCultureAlleySilverPushKartRocket, and Headout.

“However, we don’t think that’s enough. We’re thrilled to announce our plans to do more in India; much, much more,” said Pankaj Jain, partner, 500 Startups.

In January this year, 500 Startups invested in three startups including budget hotels platform RedDoorz, concierge services firm Wishup and learning disorder tracker My Child App.

Fintech Fund

Its fintech fund will be focused on companies operating in lending, investment advisory services, personal finance management, insurance, money transfers and blockchain space, and the valley based investor is targetting around 100 early stage startups globally.

“We will work with entrepreneurs delivering superior value to underserved audiences – whether directly, or in partnership with traditional players,” said Sheel Mohnot, partner, 500 Startups.

In the last six years, 500 Startups has made around 80 investments in 10 countries.

Some of its fintech investments include CreditKarmaFlywire, FeeFighters (acquired by Groupon), Simple (acquired by BBVA), iMoney, and RealtyShares.

“Our Fintech accelerator complements 500 Startups growth hacking, fundraising advice, connections, and community with Fintech-focused mentors and industry relationships. We’ll be accelerating 20+ companies per year in the San Francisco Bay Area and have already kicked off our first batch of 10 Fintech companies in Batch 16,” Mohnot added.

In total, the network of the firm includes 1,500 companies, 3,000 founders in 50 countries.

It recently closed its third global VC fund at $85 million. The VC firm is also in the process of raising its fourth global fund and Infosys is in talks to invest in it, according to a report in Times of India report.

‘Dealflow to remain strong despite valuation pressures’

DEALSTREETASIA caught up with 500 Startups fund manager and partner Pankaj Jain, who has led 50 investments in India, on the sidelines of ‘SURGE’ conference in Bangalore. Jain has gone through multiple roles in the Indian startup ecosystem, from being a founder and community builder, to accelerator and investor. Edited excerpts:

There are investors who are pulling back after spending a lot in 2015. You are not one of them. How do you see the year ahead?

To those folks who don’t want to write checks this year, I want to say: love you guys. That just means there is more for us to invest in. And I’m going to. There is inherent value here. Just because a lot of people are pricing up value doesn’t mean there isn’t value there. Sure, if you look at sentiment in the startup world, it is not as positive as it was last year. But startups are long-term game. We need to look 5-10 years out to see opportunities worth investing in. I believe deal flow will remain strong despite pressure on valuations.

How much have you invested in India so far, compared with the rest of Asia?

Our average first investment size has been around $75,000. Follow-ons have been upto $500,000. So I would estimate that we have put in about $2 million. And out of about 90-100 deals in southeast Asia, 50 have been in India.

Last year you did 20 deals. How much higher is your target for this year?

We might do 50 deals in 2016. And that is not an outrageous figure. We see enough dealflow, good quality startups and founders out there. It is just a matter of finding the right companies, and there are plenty. When I see a good company, I will go and invest. The best part is that we are not limited by geography. For example, my partner in Singapore invested in India recently although I’m looking after India. So that helps in making more investments.

With a sector agnostic fund, where would you place your bets on?

We will look at a lot of things, particularly companies that have a good business model and good traction. I am interested in startups in fintech, education, health and software as a service (SaaS). The one sector we might not invest in is hardware, because it is very capital intensive and I’m not sure if our small checks would help.

Also read:

World’s top 100 corporations are in on startup revolution: 500 Startups-INSEAD study

500 Startups was most active Asia investor in Q4 2015

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