As the Indian venture capital firm prepares to double down on the booming “middle India” market, Arkam Ventures is pursuing its second fund, looking for $180 million, roughly tripling the size of its initial fund.
The partners of the company expressed optimism in an interview about keeping the backing of prominent worldwide family offices and institutional investors for the new fund. British International Investment, SIDBI, and Evolvence were significant backers of Arkam’s initial fund.
In an interview with TechCrunch, Bala Srinivasa, co-founder and managing director of the fund, explained that Arkam, whose startup portfolio includes Jar, Smallcase, Kreditbee, and Jai Kisan, wants to use the new fund to write bigger early-stage checks and acquire larger stakes in startup companies.
The discussion of the new fund comes at a time when VC companies are having trouble closing new funds and, in many cases, lowering the goal size because of a slowing economy that has slowed the public markets during the last 18 months.
This scenario contrasts with the peak years of 2021 and early 2022, when a record number of Indian venture capital firms raised record amounts of money. Arkam’s other co-founder and managing director, Rahul Chandra, stated that while the company could have set a larger goal, it has stayed prudent given the market environment and its commitments to its limited partners.
If they were to close funds now, many companies that gathered capital at the peak of the market would probably reduce their target size by 50%, he said.
Additionally, Srinivasa questioned if returning money would be viable. You must consider whether you can return four times as much money if you raise $1 billion. Regarding the existence of prospective investment opportunities in India given the existing glut of uninvested wealth, he responded, “It’s an open subject.
Both Srinivasa and Chandra are experienced professionals. Srinivasa worked at startups and Kalaari Capital before joining Arkam, and Chandra has had a broad career that includes positions at the SEBI regulatory organisation and the venture capital firm Helion.
Arkam’s strategy is based on the idea that startups are now capable of serving the requirements of India’s larger population, including households with annual incomes as low as $3,650. By keeping service and acquisition expenses low, they intend to accomplish this.
In India, such a wager was previously thought to be unviable. A more optimistic scenario has emerged, though, thanks to the creation and uptake of the online authentication platform e-KYC, the identification platform Aadhaar, and the payments train UPI.
Similar to other places worldwide, India is experiencing a decline in deal activity as investors grow more cautious about the state of the market. For at least another two years, according to Chandra, there won’t likely be any cheap global liquidity or “unconcerned” capital.