FOMO is motivating a new class of limited partners to invest in startups.
- ByStartupStory | January 26, 2022
Early last year, a businessman from Dehradun, a north Indian city noted for its scenery and tourism, contacted Venture Catalysts through their website. This entrepreneur had overheard a lot of talk about startup financing and windfall investor gains and wanted to join in. He wanted to take some of his money out of fixed deposits and mutual funds and invest it in India’s new-age tech companies, but he didn’t know how
“He told us that sitting in Dehradun he doesn’t have access to deals, so he wants to invest in startups through our fund,” said Apoorva Ranjan Sharma, co-founder and managing director of Venture Catalysts. “He was part of the industrial revolution, setting up companies and now with technology taking over, he wanted to be part of this revolution.”
Limited partners, or LPs, are companies, high-net-worth individuals, and family offices, among others, who contribute to the corpus of venture capital funds. However, in the last year, a new breed of LPs, such as this Dehradun businessman, have begun to populate Indian funds, seeing startups as a new asset class to invest in. Business owners, traders, and merchants from smaller Indian cities such as Dehradun, Bhavnagar, and Coimbatore; C-suite executives from startups who have built companies from the ground up and profited from ESOP (employee stock ownership plan) buybacks; and the non-resident Indian community are among those affected.
In 2021, Indian entrepreneurs raised $38 billion across all deal phases, the greatest amount ever and three times the $11 billion raised in 2020. According to experts, most of this is due to new LPs jumping on the startup investing bandwagon. Traditional mid-size enterprises in real estate, infrastructure, manufacturing, consumer brands, trading, and other industries have established family office investment teams.
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