Seed funds for startups: Venture capital fund gradCapital, which focuses on startups founded by students, on Friday launched its second fund of $6 million. According to a company release, the fund will invest a standard $40,000 for 4 per cent equity and offer funded startups a 4-week cohort programme in Bengaluru to meet notable entrepreneurs such as Tarun Mehta (Co-founder, Ather Energy), Shashank (Co-founder, Razorpay), Kailash Nadh (CTO, Zerodha), and others.
As per the release, gradCapital is backed by CIIE, IIM-Ahmedabad, Alagu Preiyannan, Ankur Warikoo, and Kanwal Rekhi. Post earlier cohort, about 30 per cent of startups had raised an average follow-on round of $600k from venture funds Lightspeed and Rainmatter Capital. They fund 20 startups a year out of around 3,000 applications.
“Being a student also has an unfair advantage: building with friends, not being scared of thinking big, and being scrappy/fast with their project. How many experienced people can do that? It’s a systemic failure when ambitious students aren’t able to take off while in college, and they end up taking a job because of a loan and become too rational. After which, they are more likely to start a D2C company instead of a quantum computer, and we need more of the latter,” said Abhishek, Co-founder & CEO, gradCapital.
The fund was established by BITS/IIMA alums in 2021. Other than the equity-based investment, the fund offers a $5,000 grant titled Atomic Fellowship, supported by Emergent Ventures, to students who wish to work on science projects that can turn into business ideas and innovations.
As per the release, gradCapital started off in 2021 with a cohort of 5 teams to help them get into Y Combinator (YC), of which one was Zepto. Later, gradCapital raised a $1M fund to deploy into 18 companies. The fund is now running at 2x its initial value within 18 months.
Also read: Startup funding declined by 72% in H1 2023 reflecting global trend: Tracxn report
Meanwhile, reeling under a funding winter, Indian startups may heave a sigh of relief soon as investors expect the funding spring to return over the next six to 12 months after a prolonged funding winter. Consultancy firm RedSeer, citing a survey of 21 investors in June this year, said that 50 per cent of respondents expect 6-12 months to fund spring while 22 per cent expect 12-18 months and another 11 per cent said it might take more than 18 months.
The survey report noted that startup funding in value and volume in 2023 is expected to revert to the long-term trend line. In other words, the value and volume may recover back to pre-2021 levels. $12-15 billion across 700-900 funding deals is expected in 2023, in line with around $12 billion invested in 2018, 2019 and 2020 across 833, 810 and 953 deals before it peaked at $42 billion across 1,584 deals in 2021 and $25 billion in 1,519 deals in 2022. In 2024, the funding is likely to recover to $15-20 billion in 1,000-1,200 deals.