Introduction
India is home to thousands of new businesses called startups, making it one of the biggest startup hubs in the world, with over 100,000 startups and more than 100 companies valued at over $1 billion (called unicorns) as of 2025. While big investors have helped many startups grow, a new kind of investor called micro-venture capital (micro-VC) funds is making a big difference for small, new startups. These funds are changing how young businesses get money and support, starting a new chapter for India’s startup scene. This article explains what micro-VC funds are, how they help startups, and why they’re important, all in simple words.
What Are Micro-VC Funds?
Micro-VC funds are small investment groups that manage less money than big venture capital (VC) firms—usually between $10 million and $100 million. They focus on startups that are just starting out, giving them small amounts of money, like $100,000 to $2 million, to build their ideas, create products, or find customers. Unlike big VCs, micro-VCs don’t just give money—they also guide startups with advice, connections, and support. In India, these funds are helping startups in areas like apps, online shopping, farming tech, and artificial intelligence (AI).
Why Are Micro-VC Funds Growing in India?
More and more micro-VC funds are popping up in India. In 2024, over 228 micro-VC funds were active, and 23 new ones started that year alone. They invested around $150 million in 200 startups in 2023. Here’s why they’re growing:
- Cheaper to Start a Business: Technology has made it easier and cheaper to start a company, so more people are trying. Micro-VCs are perfect for funding these small, new ideas.
- Filling a Gap: Big VCs usually invest in startups that are already growing, but new startups need smaller amounts of money. Micro-VCs step in to help these early businesses.
- Special Knowledge: Many micro-VCs focus on specific areas, like online payments or gaming, and offer expert advice to help startups succeed.
- Easier to Raise Money: Micro-VCs don’t need as much money as big VCs, so it’s easier for them to find investors, which helps them support more startups.
Examples of micro-VC funds in India include 100X.VC, Eximius Ventures, and All In Capital, which are helping young startups grow.
How Micro-VC Funds Help Startups
Micro-VC funds do a lot to support new startups in India. Here’s how:
1. Money to Get Started
New startups need money to build their products or test their ideas. Micro-VCs give small amounts of cash to help them start. For example, 100X.VC gives startups $16,000 quickly, without a lot of complicated checks, so they can begin working fast.
2. Extra Support and Advice
Micro-VCs don’t just give money—they act like coaches. They help startups plan, solve problems, and meet important people in the industry. For instance, Eximius Ventures connects startups with experts who guide them on how to grow.
3. Focus on Specific Areas
Many micro-VCs know a lot about certain fields, like technology or farming. Funds like Gemba Capital, which focuses on software and farming tech, help startups by sharing their knowledge and advice tailored to those areas.
4. Preparing for Bigger Money
Micro-VCs help startups reach important goals, like building a product or getting customers. This makes it easier for startups to get bigger investments later from larger VCs. For example, Ola, a ride-hailing app, started with micro-VC money and later raised much more.
5. Quick Decisions
Micro-VCs can decide to invest faster than big VCs because they have simpler processes. This helps startups get money quickly and stay ahead of competitors.
Examples of Successful Startups
Some Indian startups grew big with help from micro-VC funds:
- Ola: This ride-hailing app, started in 2011, got early money from micro-VCs. This helped it grow to have over 150,000 cars and later attract bigger investors.
- Purplle: An online beauty store, Purplle used micro-VC funding from Artha Venture Fund to become a major player in India’s beauty market.
- Fyllo: A farming tech startup, Fyllo got $4 million from micro-VCs like India Quotient to improve its technology and reach more farmers.
Challenges for Micro-VC Funds
Even though micro-VCs are helpful, they face some problems:
- Not Enough Money: Micro-VCs have less money than big VCs, so they can’t invest in as many startups or take as many risks.
- Competition: Big VCs, like Sequoia and Accel, are now trying to fund early startups too, making it harder for micro-VCs to stand out.
- Risky Investments: Many new startups fail, so micro-VCs have to be careful when choosing which ones to support. They hope for big returns, but it’s not guaranteed.
- Selling Their Stake: Micro-VCs want to sell their share in a startup after 5-7 years to make a profit. But if a startup grows too big, bigger investors might push them out, limiting their earnings.
How the Government Helps
The Indian government supports micro-VCs through programs like Startup India, which offers tax breaks and simpler rules for startups and investors. The government also has rules for investment funds (called Alternative Investment Funds) that micro-VCs follow. However, slow processes and complicated paperwork can still make things hard for both funds and startups.
What’s Next for Micro-VC Funds?
Micro-VC funds are expected to grow a lot in the next few years, especially in areas like AI, gaming, and eco-friendly tech. New funds, like GenInnov, which started in 2024 to support AI startups, show this trend. More entrepreneurs who succeeded in their own startups are also starting micro-VC funds, like AJVC, created by a former startup founder. Micro-VCs are also looking for startups in smaller cities like Kochi and Jaipur, not just big cities like Bangalore or Mumbai.
Conclusion
Micro-VC funds are changing the game for new startups in India by giving them the money, advice, and connections they need to start strong. They fill an important gap between small angel investors and big VCs, helping young businesses grow into successful companies. Even with challenges like competition and limited money, micro-VCs are becoming a key part of India’s startup world. As they keep growing, they will help more entrepreneurs turn their ideas into reality, making India a top place for innovation.
Last Updated on Monday, July 14, 2025 10:56 am by Chandini Naidu
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