Kotak Investment Advisors Limited (KIAL) has reportedly deferred its Fund of Fund (FoF), the Kotak India Alternate Allocation Fund, that was launched last year to invest in venture capital (VC) and private equity (PE) funds. KIAL has already started conversations with limited partners and will soon be returning the money it has drawn. The FoF was set up with a target to raise INR 1,500 Cr, including a greenshoe option of INR 750 Cr, and aimed to solve the problem of concentration risk in VC investing because of a high minimum investment requirement. The fund’s objective is to diversify across PE/VC funds in multiple sectors, including consumer, technology, healthcare, financials, etc, as well as across multiple stages, from early stage to growth stage and late stage across different vintages. The Indian startup ecosystem has witnessed a surge in interest from high-net-worth individuals (HNIs) to invest in the venture capital (VC) and private equity (PE) space, especially after the successful IPOs of several Indian tech startups in 2021, such as Nykaa, Zomato, and Paytm. This has led to a greater demand for investment in the Indian startup ecosystem, including VC and PE funds.
It seems that despite the slowdown in startup funding in India’s startups, fund launches have been steady. According to Inc42 data, India’s VC and PE firms, angel networks and venture debt firms have announced or closed funds worth about $2.3 Bn in 2023 so far, and last year investors announced or raised 126 funds worth $18.3 Bn. This suggests that there is still strong interest from investors in the Indian startup ecosystem.
Although India’s startup ecosystem has seen some major IPOs in 2021, such as Nykaa, Zomato, and Paytm, the funding environment has slowed down due to the macroeconomic headwinds prevailing in the world. Factors such as rising inflation, supply chain disruptions, and uncertainty over the global pandemic have affected investor sentiment and slowed down funding for startups.