India's Unicorn Hunters

Everyone enters venture thinking they want to democratize the ecosystem only to realize that “only a handful of companies per year actually matter”. This post was inspired by Cole Rotman’s tweet on the firms & investments that have led to large companies being created.

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PANZEL tanks hunting down unicorns

There are only a handful of multi-stage venture capital firms in India leading Series A+ rounds in the country - something that hasn’t changed in the last decade. If a founder truly wants to build a massive company ($1B+) they have no option but to raise from one of these firms early in their company lifecycle. Multi-stage firms are often helpful in supporting these companies who have to raise several rounds of capital between their inception and an eventual IPO. So “how important are these multi-stage venture firms in this country?” and “who are they?”

The answer was, unsurprisingly, very important. Just 7 firms led the Series A of ~60% of startups that are worth $1B+ today. The list of firms is just as predictable - Accel, Peak XV Partners, Tiger Global Management, Elevation Capital, Z47 (fka Matrix Partners India), Lightspeed India Partners and Nexus Venture Partners.

The list of venture firms who have led early-stage (Seed, Series A) rounds in multiple unicorns also doesn’t run too deep either - only 16 venture firms. Moreover only 19% (18) of unicorns haven’t raised an early-stage round led by these 16 firms and only 12% (11) of these unicorns haven’t raised ANY round of capital led by these firms. The firms that are important might change over the years (i.e Tiger’s fall in importance, Stellaris & General Catalyst’s rise in importance) but it does seem that only a handful of venture firms will back most companies that actually matter. One can build a unicorn without raising from one of the PANZEL (Peak Accel Nexus Z47 Elevation Lightspeed) firms but the odds will certainly be stacked against you. (side-note: h/t to Sajith Pai for coining the term PANZEL to describe these firms).

There are a multitude of reasons for this phenomenon, and some of it traces back to only a handful of firms existing at the inception of India’s venture capital ecosystem. Many of the unicorn companies who were originally founded in the late 2000s and early 2010s raised Series A capital from these firms because they were one of the few sources of intuitional risk capital. As the years have gone on, these firms have invested in successful companies which makes the next generation of companies & founders want to work with them. You see this in practice with how many second-time founders raise capital from the firm that back their first company. Bhavish raising from Tiger Global and Z47 for Ola Electric and Krutrim respectively after they were early investors in Ola, or Mukesh Bansal raising from Accel for Cult after they lead the seed round in Myntra. In venture capital, success begets success, and emerging firms must identify what their right to win is to to earn their importance in the ecosystem.

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Now coming to the firms that are the best at finding & backing these unicorns. Accel is first having led the most number of Seed and Series A rounds in companies who are unicorns - 19% (18) of them and these include both consumer companies like Flipkart and Swiggy as well as enterprise software companies like Freshworks and Chargebee. Peak XV Partners is second with 15% (14), followed by Tiger Global & Elevation Capital at 8.6% (8) and Z47 & Lightspeed India Partners at 7.5% (6).

A partner at a global growth firm in the US once asked me - “which individual investors in India would be considered world class even in America?”. This was an individual who had invested in growth-stage companies in the country and was very familiar with the landscape and the people, and I was not familiar with most of the partners personally so never had a great answer for them. Now I can at least attempt to answer that question by seeing what individuals led the Series A for Indian companies worth $5B+ or more (to compare to this list).

And it turns out that there is only a single individual who has led multiple Series A rounds into multiple of these companies and he technically isn’t even a full-time investor. Sanjeev Bikhchandani who is the founder of Info Edge where he led the Series A rounds in both Zomato and PolicyBazaar.

Compared to Cole’s list of 97 investors in the US who’ve invested in a $5B+ company, we have 12 in India; but compared to the 22 investors in the US who’ve invested in multiple $5B+ company - we only have one.

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Here’s the Google Sheets with all the companies.

Disclaimer: I’ve used Tracxn for all the information for the funding rounds and lead investors. Thanks to Tracxn for giving me a journalist pass to research and write this post. Please DM me on X/anmolm_ if I’ve missed any companies or have any information incorrect.