8i Ventures, an Indian early-stage VC firm, is in the process of raising $50 million for its second fund to invest in consumer and fintech sectors across the country.
Established in 2018, 8i Ventures had a corpus of $15 million for its first fund of which 40 per cent has been exhausted. Its portfolio companies include Blue Tokai Coffee, and card issuing platform M2P, among others.
“Fund II is launching early next year with largely global institutional LP base,” said Vikram Chachra, founding partner at 8i Ventures. However, he declined to divulge the names of LPs the firm is in talks with.
8i Ventures’ cheque sizes are expected to begin at half a million dollars at seed stage, to Series A and B rounds in startups.
The VC raised the entire corpus of Fund I from HNIs and family offices “who have known us over the years as former colleagues, co-investors and friends,” said Chachra, who has made angel investments in a slew of startups in his personal capacity.
These include automotive Internet portal Carwale, which he has since exited; Healthcare Global Enterprises Ltd (HCG), a provider of cancer care; fintech startup SlicePay; and consumer lending firm MoneyTap.
“We launched Fund I with the goal of backing founders upgrading how India lives and works. With Fund II, we are adding the context of convenience to the same thesis,” said Vishwanath V, consumer partner at 8i Ventures. “The financial and consumer sectors, today, drive the growth of the Indian economy.”
But, given that the consumer segment is directly linked to the economy, is there a slowdown gripping it in the midst of India’s slowing GDP?
“E-commerce is entering the dawn of a golden era with growth of 35 per cent to 100 per cent across categories over pre-COVID, while the offline retail economy is waiting for recovery. A year from now, we expect more than 5 per cent of the entire retail economy to shift online,” said Vishwanath.
The trend is expected to gather steam as COVID-19 has shifted the digital economy from a nice-to-have to an essential over the past few months.
Chachra added: “India presents a multitude of opportunities so it’s important to understand why it’s important for the founding team to solve a specific problem.”
The participation by the Indian stock market in the digital economy, including the telecommunications sector, is barely 7.5 per cent. What that means is that while 90 per cent of spending has gone digital, 92.5 per cent of assets are still stuck in offline and recovery mode. And the only way to participate in the digital economy is through the venture capital industry in India (unlike the US where FAANG alone is 25 per cent of S&P 500).
Still, Vishwanath sees the trend of digitisation in the economy accelerating the pace of exits. “Founders can actually see themselves on the runway to IPO now,” he said. “Starting 2022, we will see a growing line-up of IPOs from the startup economy and that in itself will forever remove investor anxiety around the lack of exits in India.”
8i Ventures’s fundraising talks come at a time when overall investment sentiments amidst the COVID-19 pandemic market remain tepid.
Data available with research firm Venture Intelligence shows funds raised by investment firms in India recorded a steep 77 per cent year-on-year decline in the first half of this year as LPs tightened their purse strings amidst a hazy outlook for business in the country. Those who have been successful in raising capital include Lightspeed Venture Partners; technology-focused venture capital fund Iron Pillar; and Blue Ashva Capital.