Bengaluru-based early-stage venture capital (VC) firm Seafund Venture Capital is now turning its scale bigger and deeper by placing bets on startups that have technology depth, and is backing them with larger cheques.
Founded in 2015 by Manoj Kumar Agarwal and Mayuresh Raut, Seafund came out with its first fund of Rs 25 crore around 2018, and is now looking to close its second fund of Rs 250 crore by the end of this year.
A sector-agnostic B2B focused fund, Seafund typically invests in startups that have a tech play in their venture with a clear business model.
In a conversation with YourStory, Manoj Kumar Agarwal, Co-founder and Managing Partner at Seafund, says, “We clearly saw a lot of ideas, but there was a lack of business understanding, and we wanted to help these entrepreneurs.”
Both Agarwal and Raut are seasoned professionals and have worked at large corporations and have been entrepreneurs before. They were observing the changes in the Indian startup ecosystem and decided to back startups at their early stage.
“We wanted to back those startups which deliver value and have a scalable business model,” says Agarwal.
The start
One of the first investments made by Seafund was in Wigzo, a tech startup that focused on customer engagement and retention. Seafund exited this startup after it was acquired by Shiprocket in 2022.
From the first fund, the VC firm invested in around 14 startups, which includes the likes of Genrobotics, Finsall, Advarisk, Anastrat, etc. Seafund’s experience proved to be valuable for these startups to pivot into areas which had a strong business case.
For example, one of the fintech startups in its portfolio started providing stock market trading advisories to retail consumers, but soon realised it was gaining the numbers but there was no revenue coming in as these users were not willing to pay. It then pivoted to providing its services to large businesses, which ensured there was a steady revenue.
According to Agarwal, Seafund saw a net internal rate of return of 40% as of March this year.
“Our companies are doing well and we do not have any write off, but at the same time we do not have a unicorn,” he remarks.
Some of Seafund’s portfolio startups have raised follow-on funding rounds–Genrobotics has raised capital from Zoho and Zippee has received capital from Haldiram Products.
In this journey of investing through the first fund, Seafund had a few learnings where it realised that it needs to provide bigger cheques to startups and also sharpen its sector focus.
Pivot
Seafund’s Rs 250 crore (around $30 million) Fund II is a split between Rs 200 crore primary money and another Rs 50 crore greenshoe option.
While it used to invest around $100K as initial capital in startups, and then with follow-on rounds in the first fund, it now plans to invest around $0.5 million in the first round of funding and follow it up with more than $1 million in subsequent rounds in the second fund.
According to Agarwal, the larger second fund will allow it to back entrepreneurs for a longer period of time, besides having a bigger stake in such companies.
Seafund also observed a deeper technology change in the Indian startup ecosystem where new startups were emerging in spaces like semiconductor, climatetech, hardware, and mobility. In short, it plans to invest in the deeptech space.
“There are many businesses which have been founded by mature entrepreneurs and there is a need to support them longer, provided they are on the right track,” says Agarwal.
Seafund has already done five deals from the second fund, which includes startups such as Dockervision, a deeptech startup focused on port logistics; drone startup Redwing; and Simactricals, which provides wireless chargers for electric vehicles.
Agarwal says it plans to build out its portfolio for the second fund by next year. It has already invested in around four startups from the second fund.
Seafund sees various proposals from deeptech startups, which seem like ambitious ideas. There is a startup which is looking to develop a multi-fuel vehicle engine, which can automatically switch to different kinds of fuel be it gasoline, hydrogen, or electric battery. Another startup is developing a material similar to teflon, which can be used for space applications.
However, Agarwal is quite clear that Seafund will focus only on those startups that will make progress in terms of their products or solutions, and also provide certain revenue visibility.
The Indian startup ecosystem has a large number of early-stage venture capital firms and it becomes a challenging task to get a strong foothold. Agarwal believes their network helps them with deal flow, and their understanding of technology and business creates a stronger bond with its portfolio of companies.
(Graphic by Nihar Apte)
Edited by Megha Reddy
