Mumbai-based technology startup accelerator Zone Startups India has launched an early-stage venture capital fund to back software startups with a focus on mobile technology and enterprise tech.
Christened as Zone Startups India Fund, the fund is backed by Toronto-based startup accelerator Ryerson Futures, the investment arm of Ryerson University and the Chokhani family office.
Citing Ajay Ramasubramaniam, director of Zone Startups India, The Economic Times reported that the fund expects to make the first close in the next two to three months, raising the remaining capital largely from institutional investment firms in India. It hopes to make the entire fund ready by the end of the year.
It is a category 1 Alternative Investment Fund (AIF), whose average ticket size will range between Rs 50 lakh and Rs 3 crore. The firm plans to invest in around 8-15 companies over the next 12 months. Though the fund would focus on business-to-business (B3B) ideas, it would look at funded business-to-consumer (B2C) startups too, said Ramasubramaniam.
Zone Startups India received a grant of Rs 10 crore from the Department of Science and Technology to back 10-15 entities that have been incubated in its accelerator programme. The grant is invested on a recycle-and-use basis through its two-five-year lifespan, the report said.
Zone Startups was set up in 2014 as a joint venture with BSE Institute and Ryerson Futures. It runs one programme each with Bombay Stock Exchange, Barclays, Axis Bank, HDFC Bank and Thomson Reuters.
Last year in November, the accelerator, along with the Government of Ontario, Canada and Ryerson University in Toronto, had selected six ventures as winners of its Next Big Idea Contest.
Last year’s contest was held in July with TCS, Google and HDFC Bank signing up as industry partners. The contest was first held in 2013. In each edition, five startups have been selected for soft-landing at DMZ, Canada’s top university business incubator.
Last year, Zone Startups along with the Canadian government launched an accelerator programme, Gateway 91, for international startups looking to enter the Indian market.
In June 2016, it partnered with British banking firm Barclays Plc to launch and manage the Rise accelerator programme in India.
The Mumbai-based firm was also selected by Axis Bank to manage its accelerator programme, ‘Thought Factory’, in Bengaluru.
The fund enters the market at a time when the overall investment scenario is undergoing a downward trend. The number of private investment deals dropped to 238 in the first quarter of 2017, down 45% from a year earlier and 26% sequentially, according to the Quarterly Deal Report by VCCEdge, the data research platform of News Corp VCCircle. Venture capital deals fared the worst with the number of transactions falling 31% from a year earlier.
The total amount of money invested by private equity firms, venture capital and angel investors fell 27% from a year earlier and 22% sequentially to $3.04 billion in the January-March period.
Private investments, particularly in startups, started slowing in the last quarter of 2015 as valuations hit the roof and investors began to worry about the lack of visibility on profits. The trend became more entrenched in 2016, as startup shutdowns and valuation markdowns made matters worse.