Mumbai-based seed investor Blume Ventures, which hit the first close of its second $60-million fund in December, will allocate half of its corpus to startups looking to solve problems across multiple geographies. The firm is also looking at making more lead investments this year.
This is a shift in strategy from its earlier fund which invested primarily in domestic startups focussed on India. Blume is looking at achieving a final close on its second fund by May 2016.
“The focus will be different than the first fund,” said Sanjay Nath, who co-founded Blume with Karthik Reddy, in a chat with DEALSTREETASIA. “In the first fund, majority focus was on domestic-focussed startups. In the second, we will invest half the amount into startups that are made in India but for global markets,” he said.
Nath gave the instance of GreyOrange, which makes robots for automated warehouses. Majority of their customers are in Hong Kong and Singapore. One of Nath’s first investments through Mumbai Angels was in InMobi, which has several customers outside India, and is valued at over $1 billion. “Half of our investment has to be in companies like that,” he said.
Blume will also take the lead in more investments, as rounds become larger. “Now $1 million is the new $500,000 or $250,000. Lots of ex-founders from startups like Ola and Flipkart are turning investors. They have actual startup experience, and want to raise more,” Nath said, giving the example of the founders of hyper-logistics startup RoadRunnr, in which Blume has invested.
“We did a lot of syndicates – about 60 companies in the first fund. In the second, we will do about 40 and will lead more rounds, write larger checks. Earlier there were deals with like 20 angels and Blume. Now we want to minimize that and lead more, so that there are fewer people to work with, and we can work better with the entrepreneurs,” Nath said.
Blume typically invests $100,000-$250,000 in each startup, and comes in at the seed or pre-Series A stages. It will look to invest a higher amount, between $200,000-$500,000 this year from the second fund, which is about three times larger than its first one.
Fundraising environment not great
Blume Ventures has been investing from its second fund since last year in companies like Roadrunnr, test prep platform MockBank, Zenatix Solutions, an Internet of Things (IoT)-based energy energy data analytics provider, and Chillr, a peer-to-peer money transfer and payments app. It has invested in five startups this year, the latest being Bangalore-based edtech startup FlipClass.
The firm had started the fundraising process for Fund II in early 2014, and increased the size of the fund subsequently. It had expected to close the fund in the first quarter of 2015, but that period got longer.
Nath said that the environment for fundraising was not great right now. “China is tight. The environment overall is moderate, not fantastic, nor dismal, because the fundamentals are strong. We have been on the road for 18 months. The tricky part about fundraising is whether you are raising $60 million or $600 million, it takes the same amount of time,” he said.
Investors in the first close include ICONIQ Capital, a global multi-family office and merchant bank for a group of influential families, IIFL Wealth and India Aspiration Fund, run by the Indian government and administered by SIDBI.
For Nath, firms like Andreessen Horowitz, the Silicon Valley-based venture capital firm with $4.2 billion under management, are the models to follow.
“We have been looking at models that have utilized platform approaches to venture capital. It’s not just two guys at the top, but about building a full team. So, at Blume, we have an analyst meeting people at the investor lounge, a principal who’s working with corporates. We have been very clear from the beginning that we have to add value in ways far more than just capital. The whole platform approach includes an affiliate team that helps our companies with marketing, finance and pitch decks, termsheets, back office work. You got to have that,” Nath said.
There have been several cases in the last 3-4 years, where startups floundered without proper guidance. Nath said that having an effective board is to strike a balance. “If the board interferes, its not great. At the same time, you can’t keep a blind eye to what’s going on,” he said. “We tell startups that you can only control your costs, not your revenue. So focus on that. In that sense we are hands on. But we are also try and add value.”