How will VC funding play out in 2016?

(L-R) Karthik Reddy, managing partner, Blume Ventures, Vani Kola, managing director, Kalaari Capital; and Shekhar Kirani, partner at Accel Partners at a panel discussion titled 'The big bang: India and Venture Capital', at the startup conference SURGE in Bengaluru

How is venture capital (VC) funding in India shaping up in 2016? According to Vani Kola, managing director, Kalaari Capital, the number of VC investments in the ongoing calendar year “would not be very different” from the investment numbers of the previous years.

“We invest in 10-12 deals a year and that isn't going to change. What has changed is that there is proper due diligence happening. We are deeply committed to the enterprise for the long run versus just putting in money,” admits Kola, who was part of a panel discussion—The big bang: India and Venture Capital —at the startup conference SURGE in Bengaluru on Tuesday. Shekhar Kirani, partner at VC firm Accel Partners and an early investor in Flipkart, and Karthik Reddy, managing partner of Blume Ventures, were also part of the discussion.

“You don't dramatically shift the number of investments you make. It is very difficult to build our teams, as the venture model itself is not rapidly scaleable, in some sense. And that’s been a challenge globally, it’s not an India problem,” says Reddy.

That apart, there are some visible changes that the VCs see taking shape from the perspective of startups, and the way funding is happening. “Good businesses are being built, entrepreneurs are throwing up interesting ideas, unit economics are real, VCs are taking time to put money into companies and they are writing normal cheques,” says Kirani. Accel Partners has already made over 10 investments in the last two sequential quarters. “I think the leaders and winners in the market will continue to get money,” he says.  

The key takeaway from the panel discussion was that VCs are looking to engage more with entrepreneurs to get to know their products and price points better.  And more critically, what is the customer value proposition that the entrepreneurs are bringing to the table. The venture capitalists also had a word of caution for entrepreneurs.

“Be judicious in how much money you raise and when. And know, that when you are raising VC money, it comes with certain expectations,” says Kola. An analogy she drew was that: “You can’t drive a Formula One car slowly.”