Shalini Prakash is the only member of 500 Startups left in India. Pankaj Jain, partner and India operations head, quit at the end of December 2016. Soaib Grewal resigned a few weeks before Jain. And the $25 million 500 Kulfi fund failed to set.
A spokesperson told Economic Times in January 2017, “Due to recent moves by the India government regarding tax and regulatory environment, our India fund is on hold temporarily, until we have more clarity.”
Was that it?
The Ken sent a detailed questionnaire to Prakash and 500 Startups’ managing partner Dave McClure last week. There was no reply forthcoming from either of them.
500 Startups is one of the most popular seed fund companies globally—with investments in the US, Southeast Asia, India and even Europe—and has some stars in its portfolio. It has seen three of its companies go on to list in public markets, while a dozen have been acquired for big money. And 500 Startups has been largely successful in most of its markets. India, according to a former employee, is the second largest market for the VC firm, after the US. And 500 Kulfi was to be a milestone move for it.
So far, 500 Startups has invested between $10-15 million in India, according to a former employee. This corpus was spread across 56 investments, according to Tracxn. The verticals range from travel, edu-tech and payments to fashion, social media and video. You name it, they made it.
“A pie chart was drawn. What are the sectors that need a version 2.0 or even a version 1.0? Travel and edu-tech were the sectors chosen. And investments followed,” says an investor from a rival firm with knowledge of 500 Startups’ strategy.
Depending on whom you ask, 500 Startups made between three to seven exits in the last six years. Twitter acquiring ZipDial was the only brag-worthy exit.*
With one glowing exit, Jain and McClure decided to raise another fund directed towards India and the subcontinent. In February 2016, 500 Startups announced its plans to raise a $25 million fund called 500 Kulfi. Like the ice cream. But their plans apparently melted in the heat of the tax reforms and valuation corrections.Pankaj Jain’s spray-and-pray approach in India did not quite work as expected
“We had promises from a few LPs [Limited Partners] and had raised a part of the fund, and we were in talks with Small Industries Development Bank of India (SIDBI) for the rest,” says a former employee, who asked not to be identified, as he did not want to get into trouble.