Investment

Family offices back Indian’s biggest venture deal

Unfazed by market unrest, VerSe Innovation, the Indian social media group, has raised $805 million from international investors in its latest funding round.

This is the largest sum raised in Indian VC in 2022, producing a notional value of $5 billion for the company. The previous record-holder was Indian food delivery company Swiggy, which raised $700 million in January.

Like other startups in India’s ebullient VC community, VerSe won early support from the country’s family office community, which has recently allocated as much as 20% of their investments to venture capital following strong returns. 

In a survey of 100 family offices by data provider Trica, 40% of respondents said they had doubled their exposure to private markets over five years, as reported by Family Capital last year. 

As Indian ventures grow, however, they have no option but to look abroad for overseas backers. VerSe’s latest investors include CPP Investment, Canada’s biggest pension fund, Ontario Teachers pension plan. Sumera Ventures, co-led by tech guru Sauman Chakraborty; hedge fund Luxor Capital; Baillie Gifford and the Boël family’s Sofina Group of Belgium.  

Recent investors include Omidyar Network, Edelweiss, Kotak, Alphawave, Matrix Partners, Canaan Valley Capital and Sequoia. Global backers include Qatar Investment Authority, Carlyle Group, Google, ByteDance and Microsoft.  Catamaran Ventures, a family office founded by Narayana Murthy of Infosys, is an investor, according to Matrix.  Another shareholder is Arun Sarin, ex-chief executive at Vodafone, more recently director at Accenture and Charles Schwab.

Many investors view VerSe as a leader in Indian social media through an app called Josh, which provides short videos to 150 million users a month. Another app, DailyHunt, offers news and other content in their local language, coupled with PublicVibe, a hyperlocal video platform. The apps provide people with the opportunity to become influencers and boast a strong advertising base.

VerSe’s founders Virendra Gupta and Umang Bedi want to build India’s largest AI-powered local language content platform across a range of apps. But they do not rule out making an acquisition. And they may use blockchain content to spread further, and faster.

VerSe says it can reach one in every two internet users in India whose population of 1.4 billion is forecast to overtake China this year. Populations this large can offer incredible opportunities to achieve scale, as Alibaba has demonstrated.

As well as betting on growth, global investors also hope to win business from VerSe, which can be hard to achieve from scratch, as a result of the Indian government’s protectionist instincts. 

Coincidentally, the Indian government is currently reviewing plans by a much larger startup, the $48 billion online educational provider Byju’s, to get a US listing through a SPAC, where listed vehicles led by tech-driven Michael Dell or financier Michael Klein have each made proposals.

According to Bain & Co VC funding in India hit $38.5 billion in 2021, or triple the rate experienced in China. Consumer, fintech and software-as-a-service comprised 75% of total offerings.

Seed funds and family offices were each crucial in getting startups launched, according to Bain. As is the case in the US, and some parts of Europe, family office networks developed by a current generation of entrepreneurs will play an important role in funding startups, as illustrated by Catamaran. 

Global VC fund-raising hit $160 billion in the first quarter of 2022, a 7% rise compared to the same period in 2021, but a 13% fall against the fourth quarter of 2021, according to Crunchbase. 

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