Amid a gradual resurgence in startup funding, Prateek Jain, Principal, Fundamentum, is confident that investments will increase. He explains why the growth-stage investment firm believes that India’s digital transformation presents golden opportunities for venture capital. Edited excerpts from an interview:

Q

Could you describe your investment pattern?

India has ample early-stage capital, but when it comes to mid-stage, especially Series B and C, the market is underserved. 

Fundamentum invests in the mid-stage, when it is time to validate product-market fit and, from a VC point of view, evaluate a company’s performance and capital efficiency.

Currently deploying our second fund worth $227 million, we have made five investments across sectors such as consumer internet, B2B (business-to-business) and fintech: KukuFM (content), Wishlink (creator economy), ProcMart (B2B), AppsForBharat (spiritual tech) and Flexiloans (fintech).

Q

Which are the sectors in focus?

While we are technically sector-agnostic, each of our investment leads has specific areas of interest. 

We’re particularly excited about digital consumer apps like KukuFM that cater to the unique needs of Indian consumers. Additionally, there’s immense potential in creating digital tools for small and medium-sized businesses (SMBs), especially in India, where most shops operate without desktops and rely solely on mobile phones for operations.

Q

What is your average cheque size, and what kind of exits do you target?

Our average cheque size is ₹100 crore, and we maintain a concentrated portfolio to ensure high conviction in our investments. Additionally, we take up active roles as board members, guiding companies through their scaling-up journey.

We typically look for scalable and sustainable businesses, aiming for exits through IPOs (initial public offering). While M&As (mergers and acquisitions) are still relatively uncommon in India, we see IPOs as the primary route to exit profitably.

Q

There’s a noticeable shift in investment sentiment. Is this a good time to invest in Indian startups?

We’ve moved out of the fear zone that gripped the market in 2022 and early 2023, and now we’re in a “no fear, no greed” period. This is probably the best time to invest, because valuations are more reasonable and companies have focused on getting unit economics and profitability in order. 

We’ve seen strong deal flow in 2024, with three deals announced in just four months. I expect this golden period for venture capital in India to continue into the next couple of years, especially as global investors turn away from China and look toward India.

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