Despite a slowdown across sectors such as automobiles, consumer goods and metals, startup funding has reached an all-time high as investors are willing to infuse more funds enthused with startups who are scaling four to five times using the same amount of capital compared with a few years ago, said Ritesh Banglani, co-founder and managing partner at Stellaris Venture Partners, a $90 million early stage venture capital fund.
“Investor sentiment aside, I think the more material fact is that we’re not seeing a growth slowdown in tech startups. In fact, I have never seen this velocity of growth with relatively modest amounts of capital in my entire venture career,” Banglani said. Despite this, the fund aims to keep its deal making pace constant, to about six deals a year, maintaining the same pace of 2016 and 2017.
“We do have a bit of a problem of plenty and certainly a temptation to dramatically increase our pace of investing. However, we have decided to raise our bar in this environment and maintain our regular investment pace. That discipline helps us achieve a certain cost-averaging in our portfolio and allows us to diversify across different points in the economic cycle,” Banglani said.
Stellaris, set up by Banglani, Alok Goyal and Rahul Chowdhri, former partners at Helion Venture Partners, has a portfolio which includes scooter rental startup Vogo and personal care brand Mamaearth.
Helion’s investments included online grocer Big Basket, online retailer Shopclues and Livspace. From Helion, the partners have also scored exits including MakeMyTrip, which went public, Letsbuy, which was acquired by Flipkart and redBus, which was acquired by South Africa’s Naspers.
Stellaris is also bullish on lending, a sector where virtually all venture capital funds have multiple bets. However, the recent liquidity crisis has hit lending startups, with disbursements falling, and those without a differentiated approach fighting for survival.
“Lending is a unique beast in the sense that the classic “move fast and break things” approach to growth will almost certainly lead to disaster,” Banglani said, adding that lending startups that thought distribution will drive growth, or which use “alternative data” to underwrite risk, have not been able to succeed because the data is available to any app willing to snoop on your phone.
Venture capital funds are also riding India’s growth story and future potential, with a number of large funds including Accel, Lightspeed and Kalaari Capital hitting the market to raise fresh funds, totalling nearly a billion dollars, according to media reports. Marquee fund Sequoia Capital has also asked for a $200 million extension on its sixth India fund of $695 million, indicating robust interest from overseas limited partners who tend to invest in VCs.