Micro VC fund, Gemba Capital expects to announce the final close of its $10 million fund in March 2022 along with plans to invest in eight startups this year. 

Gemba capital has till now invested in 33 startups and has a funding ticket size of $200,000 per company. Few of its portfolio companies include Insuretechs Plum and Verak, alternative investing platforms Grip invest, agritech startup Unnati, workforce management firm Zuper and cloud kitchen Hoi Foods. 

BusinessLine spoke to Adith Podhar, founding partner of Gemba Capital about the firm’s $10 million fund and their analysis of decentralised finance.

Q

When can we expect the final close of your $10 million fund? Have you started making investments from the fund?

We should be able to announce our final close of the fund this month, there is a chance that the fund gets oversubscribed and if that happens we will have to push the final close by a month or so. We have already started building the investment pipeline. While we have not started deploying capital yet, there are a couple of deals in the pipeline. Hopefully, our first investment should happen in March or the latest by April. We are now shifting gears from fundraising to fund deployment. The idea is to do about eight investments this year. 

Q

What are your focus sectors with this fund?

Broadly 50 per cent of this fund will be invested in Fintech and SaaS companies. The balance will be deployed in consumer tech companies in gaming, healthcare and deeptech.

Fintech being one of your focus sectors, what is your analysis of decentralised finance (Defi)? Will Gemba Capital invest in DeFi startups?

There is a tremendous amount of excitement in web3 space and I believe India will take a lead here. From a global perspective, India and the US can take a lead in web3 because of the talent availability of engineers, as these are very technical engineering oriented businesses. We already have examples like Polygon, CoinDCX, WazirX but there will be much more happening in this space. So we are keeping our eyes on it. 

We have started building out a thesis on DeFi space, the thesis is more or less built. But we have limited capital and we are going to do a limited amount of transactions. So we are being cautious about the bets we want to take in the DeFi space - whether it will be in the infrastructure layer and platform layer. Once we understand the landscape, talk to many founders and understand the gaps where we want to work — that’s when we will start deploying funds in this space. So maybe out of 8 startups this year, you will see a couple of our investments in DeFi space. But we are not in a hurry.

Q

2021 saw a huge funding rush in the startup ecosystem but increasingly there are reports of start-ups not being able to raise their next funding rounds. Have you observed a slowdown in investments?

It’s pretty natural and not something to worry about. Whenever there’s irrational exuberance in the market, the market has to come back — in public markets we call it Mean Reversion. This starts from the later stage companies Series C, Series D onwards, because they are directly comparable to public market multiples. In the past couple of months, public market multiples have taken a hit, especially on the SaaS side, that will trickle down to the private markets as well. Because there cannot be so much disparity in public market valuation and private market valuation for similar size companies, so that will converge. But it does not happen so much in the case of early stage such as pre-series A, seed, Series A. Because the number of startups are too many and you don’t have exact comparables, as much data or let’s say a history of the company. I don’t see much valuation correction happening for early stage startups but for later stage companies, it is going to happen. 

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