Micro VCs emerge as new force to foster Indian early-stage startups

When IvyCap, a local early-stage VC, sold its partial stake in direct-to-consumer beauty and cosmetics startup Purplle in March for USD 45.6 million, clocking up a 22x return on a USD 2 million check it wrote in 2015, it grabbed the attention of the whole Indian investor community.

The exit from Purplle, which was valued at about USD 300 million then, helped the Mumbai-based VC firm generate a return, 1.35 times its entire fund value of INR 240 crore (USD 33 million). And more than that, it has reinforced the confidence of local investors in micro VC funds.

Over the last several years, micro VCs funds—those with a corpus of around USD 30 million and primarily operating in the pre-seed, seed, and pre-Series A, basically all early stages—have steadily gained prominence in India. The number of micro VC funds has increased to 88 in 2020 from a nimble 29 in 2014 in the world’s third-largest startup ecosystem, according to a recent joint report by the Indian Private Equity and Venture Capital Association (IVCA), Amazon Web Services, and Praxis Global Alliance.