StartupCentral

Barely a week into the new year, specialist seed stage investor Seedfund is close to signing two new deals worth nearly $5 million. One of the deals in play is a startup in the mobile value added service segment, which is likely to corner a commitment of $3 million, while the other is an ecommerce startup based in Delhi, said sources close to the firm. Both the investments are being made from Seedfund’s $54 million Fund II raised last February.

The Mumbai-based venture capital investor wrapped up 2011 with 10 deals, making it the third most active venture capital investor in the country last year. It closed the year with a $1 million investment in Mumbai-based Heckyl Technologies, a Mumbai-based startup that provides real-time financial information and analytics. Heckyl was also the winner of the country’s first multi-city bootcamp organized by Indian Angel Network and Springboard Ventures in June. In all, Seedfund has investment commitments for approximately $20 million from Fund II, which includes the two new deals it is yet to announce. This takes its total investments across its two funds till date to $35 million.

A significant milestone for Seedfund last year was that two of its four incubatees — MyDentist and Jeevanti Healthcare — have graduated from the incubator, dubbed the Seedfarm, that it started in the middle of last year. The incubator starts off young businesses with an initial investment of nearly $200,000 and commits $2 million in follow-on funding, subject to the startup achieving certain pre-stated performance targets. The other two startups currently in the incubator are comic book startup Level 10 Comics and Frontier Markets, a Jaipur-based company in rural sales and marketing distribution.

Apart from the Fund II deals, the firm’s $15 million Fund I, launched in 2006, has invested in 12 companies which includes online auto classifieds startup CarWale, online bus ticketing  company Redbus and affordable hospitals chain Vaatsalya. 2011 has also been a breakthrough year for the firm, which is headlined by founding partners Pravin Gandhi, Mahesh Murthy and Bharati Jacob, on the exits front. The firm’s investing strategy — seed investments in innovative but unproven businesses — had few believers when they started in 2006. In late 2010, the strategy received validation when CarWale, in which the firm had invested $690,000 for a 25 per cent stake in 2006, was acquired by German media conglomerate Axel Springer. Seedfund made $25 million on the deal, whose total value was never disclosed.

The exit provided the venture capital firm with the momentum to raise its second fund and go after deals in its chosen segment more aggressively. It has also spurred other venture capital firms active here to look more closely at deals in the seed stage. While this is further validation of Seedfund’s investment strategy, it makes the playing field for the firm, which is still small compared to many of its peers, much more competitive. 2012 will probably be the year that will test Seedfund’s tenacity in the marketplace.