Hong Kong-based seed stage investment firm Swastika Company has been investing aggressively in Indian startups at a time when other investors are taking longer to evaluate their investments.
“Its the best time to buy as you get better deals at less price. Its a buyer’s market now. In 2-4 years the market will be tough as valuations will go extremely north,” “Vaibhav Jain, Director, Swastika Company, told DEALSTREETASIA in an interview.
Incorporated in 2014, Swastika has already invested in over 12 companies since it became operational late last year, including at least three companies in the last one month and is now training its sights on the African market.
“We have invested in 10-12 startups already. We might look at investing another 4-5 by end of next year. There isn’t a particular number in our mind as such. If the idea is good with revenue potential, we will surely invest,” Jain said.
With a ticket size of up to $250,000 at the seed stage, Swastika’s portfolio includes SimplyMoveIn, Bangalore-based online used-books marketplace AbeRuk, Gurgaon-based on-demand concierge startup Qlivery, restaurant deals startup Pocketin and Gurgaon-based beauty and wellness startup Stylofie.
Swastika has also invested in African online B2B market place Esaja, and is gearing up to invest more in the region.
“We have already invested in a venture in Africa and are open to more opportunities in Africa. The plan is to get into equal number of startup investments in Africa as we have in India,” said Jain.
According to a recent report by Preqin, Africa has become increasingly attractive to investors, buoyed by its young population and growing middle class. This is evident from the fact that global private equity giant KKR has set aside $100 million for investment in Africa.
“Despite ongoing concerns over slowing growth in Sub-Saharan Africa, Africa as a whole experienced significant growth in capital raised from $1.6 billion across funds closed in 2014 to $4.5 billion in 2015, a record for the region,” said the Preqin report.
The sector-agnostic investor is currently bootstrapped, and plans to continue on the same path till it builds a strong portfolio.
“We do not have a fund for now and its mainly individual savings. The size of the fund is confidential an I cannot share this with you, however, currently we have enough funds to invest in a targetted number of startups. We are not looking at raising any funds for now,” said Jain.
“Next one year would be very exciting as many VCs who are on the fence now will enter the market with greater vigour. We are looking at holding onto our investments for at least another 5 years unless we get a superlative deal. So next one year our investments will reduce as valuations get expensive,” he added.
In the first half of 2016, the deal volume fell 13 per cent to 643 deals, according to VCCEdge data. Institutional funding in early and late stage startup has suffered this year. But angel investments have gone up, as they rushed to fill the seed-level funding void in India, among the fastest growing economies in the world.
However, there was little respite for late-stage startups struggling to raise funds. Also, angel funding rounds, while growing 16 per cent to 368 deals, were lower in terms of deal value, which slipped about a quarter to $100 million. That is a sign of a decline in average funding levels.
“For now, we will focus only on seed stage rounds as they have higher potential to give better returns over 3-5 year period,” said Jain. “Maybe raise a fund in 4-5 years time when we might plan to get into the post seed stage deals,” he added.