Small is beautiful. This phrase captures the spirit of the ever expanding Indian startup ecosystem where everything starts small, and this also gets extended to the world of venture capital (VC) funds.
Sparrow Capital, a micro VC fund founded in July 2020, has started in a small but very meaningful way, where it wants to create an impactful niche.
Bengaluru-headquartered Sparrow Capital could be seen as the growing band of micro VC funds in India that is looking to partner with an entrepreneur at the ideation stage and help them in the “0 to 1” journey with capital and knowledge.
Founded by Yash Jain, it is a small fund raised from domestic limited partners (LPs). The firm invests up to $100k per company and has made nine investments so far, including GoKwik, Bimaplan, Qoohoo, and Mailmodo.
At present, the VC fund focuses on segments like SaaS, fintech, and B2B. It typically invests in pre-seed to pre-Series A stage with participation in deals sizes that range from $300k to $2 million.
“We may not write the largest cheques, but we will work very closely with you and also give you impactful advise,” says Yash.
Space for small funds
An alumnus of IIT Roorkee, Yash has worked with two large VC firms – Kalaari Capital and Arkam Ventures, and also at Flipkart, and found his calling in the world of investing.
“Having worked at these VC firms and getting the exposure made one thing very clear for me. I really enjoy partnering with entrepreneurs in their journey,” says Yash.
Sparrow Capital is for now a one-man show and it is quite natural that it will have to fight its way to find a place on the captable of startups and also be a voice that is counted.
However, Yash is very confident that he will be able to create a space for Sparrow Capital in the dynamic VC world with a unique value proposition and an impact in the ecosystem based on the changes which are happening within the ecosystem.
The VC space
The venture world of the Indian startup ecosystem is not a small group anymore, and many investors are entering the arena – be it micro VC funds or angel investors.
A survey done by IVCA and AWS along with Praxis Global Alliance reveals that micro VC firms invested $341 million in 566 startups across 730 deals between 2018 and 2020. It further stated that the number of micro VCs in India increased from 29 in 2014 to 88 in 2020.
“If one looks at the US startup ecosystem, one realises how, over a period of time, a lot of same funds have come out. In India also we are seeing the same. India will see many more large VC firms being built over the next decade,” says Yash.
Also, there are things changing on the kind of people who are entering the world of VC investing. Earlier, it was more veered towards somebody who was an IITian with an MBA, but it has become a more open field now.
Creating the niche
Working at VC firms for many years gave Yash in-depth exposure into the venture world such as doing board work with investee companies, interacting with limited partners, meeting founders, and building relationships, among others.
However, all these changes when one starts to chart their own path. Yash is trying to create a differentiated institution here and not go by conventional narratives.
“We will be a very thesis-driven firm where every investment that we do will be process driven and written down so that even two years down the line, we know what our assumptions were, and whether we need to rethink them. The process is the king for us,” says Yash.
Yash says he constantly strives to add value to the ecosystem, be it as an investor or otherwise. He focuses on making every minute of the entrepreneur’s time valuable on both ends and aids the founder to achieve their goals.
“Entrepreneurs respect those who have insights and it is our constant fight to prove that we can add value,” says Yash.
He emphasises that there are smart entrepreneurs around who believe in long-term relationships with investors, whose value goes much beyond just capital and seek for research-driven insights, stronger connects within the ecosystem, helping with the next round of funding, etc.
Yash says that Sparrow Capital can play this role efficiently and will be very selective while investing in a startup so that it can effectively devote its resources to an investee company.
Yash is also grateful for the kind of mentors he has found in his career till now who have given him valuable feedback on various issues. These range from issues like where to invest money, how much to invest, interacting with LPs, strategy of fund, etc.
“I do not shy away from asking for advice, and people in this ecosystem are very helpful,” says Yash.
The eight months of running an independent VC firm has been a very meaningful experience for Yash where he has built relationships with a cross-section of people, and there is positive feedback on what he is trying to build.
Yash also plans to launch a second and bigger fund for Sparrow Capital and this will mean taking more people onboard.
“We have what it takes to build a good fund and building it from bottoms up. I am also going to work doubly hard,” says Yash.