A panel discussion on start-up funding on Friday at the Huddle Global 2023, organised by the Kerala Startup Mission, focussed on the potential of smaller cities to attract investments in start-ups. Anil Joshi, managing partner of Unicorn India Ventures, made a projection that 50% of the investment portfolios of all venture capitalists would be from Tier II and III cities of India by 2025.
He made a strong plea to other investors to look beyond major tech hubs like Bengaluru and Gurgaon and park their funds in nascent enterprises in smaller cities with high growth potential. In the last financial year, fund flow into start-ups saw a dramatic decrease across the nation and Kerala was no exception, he noted. However, in Kerala the downslide was mostly on the top of the pyramid or big ticket deals, and there were enough funding activities at the bottom of the pyramid made up of early-stage firms.
On local problems
Thiruvananthapuram-based Genrobotics, which offers technological solutions in various sectors including its robot which cleans sewers, was cited as the kind of companies from smaller cities which tend to focus on solving problems that exist around them. Mr. Joshi, one of the pioneers of angel investments in India whose venture fund has been approved by the SEBI, revealed that of the 38 investment portfolios his firm currently holds, 40% are in Kerala-based firms.
Vineet Mohan, co-founder of Konglo Ventures which has invested over ₹7 million in start-ups so far, also backed Mr. Joshi’s view that investors are still looking for companies that are innovative, have good value, and sound business plans. He said that we should stop celebrating the valuation status of companies that reach unicorn stage (a valuation worth ₹1 billion) as investors focus more on the value, scaling up possibility and sustainability.
The green factor
Mohammed Shoeb Ali, co-founder of Transition VC, pointed out that the climate tech sector has actually seen a rise in investments despite a 50% year-on-year drop in the overall funding activities in the last financial year. Areas like clean energy, green mobility and similar areas will attract more investments in future, he noted. He said a recent survey showed that there was a need for more technology and innovations if the world is to reach carbon neutrality goal and it is an area where start-ups have space to grow globally.
