US-based, early-stage venture capital firm Village Capital, which has so far invested in 13 start-ups in India, plans to invest in four more Indian early-stage ventures in the education and fintech sectors.
Founded in 2009, Village Capital invests in companies across five sectors — agriculture, health, financial inclusion, clean energy and education. The investments are made out of a global $17.7-million fund in the US, Latin America, Africa and India.
Investment readiness
The firm adopts a unique model to identify the ventures it will invest in. Rather than going through top-down due diligence, Village Capital runs investment readiness programmes for 10-12 entrepreneurs within a specific sector at a time, using a peer-selection method to decide the ventures it will invest seed capital in.
“We are currently running our 13th investment readiness programme with 13 early-stage fintech start-ups, from which we will invest in the top two, as ranked by the start-ups themselves,” Deepak Menon, Regional Manager - South Asia, Village Capital. “We are also in the final stages of closing investments in two education start-ups from the previous programme. We invest $50,000-$100,000 per venture, only in the top two ventures from each programme.”
The firm has made 91 investments and 13 exits globally, and 13 investments and three exits in India. While the maximum investments worldwide have been in financial services, followed by energy and environment, in India, the maximum investments have been in the education and health.
The VC firm has moved from conducting programmes for multiple sectors to specific sectors over the past few years. “While mixed programmes from multiple sectors worked very well for cross-learning opportunities for the entrepreneurs, for due diligence and peer ranking, it is easier if they are all from the same sector. This is because they will understand the market dynamics very well, and there is an enormous amount of learning and synergy,” Menon said.
Asked how much stake the firm acquires in the start-ups it invests in, he said: “We take an equity stake in the start-ups, but the stake varies depending on the stage of the company, how much money they have already raised, etc. We just take an observer’s seat on their board and are very flexible with our terms. We also do follow-on investments which are larger than our seed investments, on a case-to-case basis, like our investment in Simpa Networks (a solar home system manufacturer).”
Village Capital’s other start-ups include Sevamob and iKure (healthcare services) and Simulanis Tech (AR-VR tech).