Early-stage venture capital (VC) firm Blume Ventures has, since its founding in 2010, backed more than 150 start-ups including unicorns like Unacademy, Slice, Purplle, Spinny and Ola.
Ashish Fafadia, partner at Blume Ventures, shares his take on the opportunities and challenges in the sector. Edited excerpts:
What are the major changes taking place in the start-up ecosystem in India over the last few years?
Over the years, start-ups have evolved into a broad-based ecosystem, wherein investors have acknowledged that ‘a winner takes it all’ approach may not work in the type of country India is today. There are more kinds of players — micro-VCs, specialised funds, corporate VCs — in the ecosystem; the engagement with companies with a digital-first approach has increased. Further, there has been greater acceptance of the uniqueness of the Indian market, which has encouraged the need to back companies in diversified areas of business.
How has the funding winter impacted start-ups?
There has been consistent funding for early-stage and mid-level start-ups if it is clear that the business can run well and become efficient. We have seen a healthy traction over the last 18-20 months across portfolios, with at least one start-up receiving funding each month. However, at growth stage it is tough to get capital. The key factor will be a greater thrust on profitability, and companies will be rewarded for efficiency, which was missing during the last couple of years. It is not so much a funding winter, because there is greater balance between the cheque receivers and cheque writers.
How much funding have you raised till date? Which sectors are you excited about?
Till date, we have raised $600 million. We are particularly excited about SaaS [software-as-a-service], fintech, consumer ideas, and environment.
What does your current portfolio look like?
In our current portfolio we have made well over a dozen investments across sectors. Overall, the intention is to continue to go deep and reinvest in the ecosystem.
When was your latest fund launched, and what are the sectors of interest?
The last fund was announced in 2022; that’s when we closed our Fund Hope. We are currently in the midst of raising our ₹400-crore Opportunity Fund, which is for growth and secondary investments, and will likely be closed next month.
In terms of exit, what is your preferred route?
We have had 30 exists till date through secondary sale and mergers and acquisitions. However, IPO [initial public offering] is our most preferred route, even though they have been far and few. We have a host of companies which are ready and ripe to start preparing for IPO and we anticipate a few of these IPOs over the next two to three years.