Recently, Rocketship.vc has announced the $125 million first close of its third fund and expects the final close of $200 million to happen by the third or fourth quarter of this year. Some of its portfolio companies include Moglix, NoBroker, Jar, and Fampay among others.
Sailesh Ramakrishnan, Partner at Rocketship.vc told BusinessLine that he estimates 15 - 20 per cent of the early stage VC’s third fund to go towards space tech and climate change related startups.
How many investments have you made from the third fund and how many more do you plan to do this year?
Till now, we have made three investments from the third fund. We typically invest $3-$5 million cheques in 6 -10 companies a year. The fund life is about two to three years, and we typically do a total 20 to 22 investments. At this time, space tech and climate are the two sectors that our algorithms are showing tremendous growth globally. However, one sector doesn’t make a majority of our investors. So, I would guess 15- 20 per cent of our fund to be invested in these two sectors. Our most recent investment is in climate tech, and our upcoming but unannounced investment is in space tech.
Given that you have worked with NASA (National Aeronautics and Space Administration of the US) in the past, what is your view of the space tech landscape in India?
India is going to be a tremendously big player in space tech globally. The accomplishment and track record of ISRO is somewhat underrepresented and under emphasised. It is significant what ISRO has done and it has led to a lot of young people looking at space related opportunities and creating space tech startups. The institutional knowledge of ISRO will translate to this technology becoming successful, but at the same time the private sector can leapfrog these technologies.
Most Indian space tech startups tend to be in the prototype stage or pre-revenue phase. When do you see this changing?
It has always been an issue with space tech that it takes about 7-10 years before you can get something working. However, these companies are compressing that timeframe, quite a bit. What SpaceX has achieved in getting something much closer to market, is now being replicated by other spactech companies as well. We are expecting space tech companies to start generating revenues in the two to three years time frame, rather than the earlier 7 to 10 years. Having said that, it is also a function of probability in space tech, the first time something is made it is not necessary that it will work. So assuming everything works, companies will make money in three years but this is a high risk business.
Climate and spacetech are two sectors that typically struggle in raising funds. Can we expect to see that trend changing as well?
Earlier, only very large investors or very patient investors would invest in spacetech because it took 15 to 20 years to generate returns. However, solutions today are enabling these companies to generate revenue in three to five year horizons. So, I expect more investment and more variety of investment to go to these categories.
The larger opportunity in some sense is in climate change, because there are a spectrum of things that can be done here, especially in emerging economies like India. I fully expect those two segments to have tremendous interest but climate change in particular to be significant in the next two to three years.
Globally, late stage startups have been harshly impacted by the funding slowdown. However, early stage deals continue to happen. Do you see any impact of funding crunch on early stage funding rounds?
Not much has changed in the early stage, other than perhaps there is a compression in valuations and consequently round sizes. Earlier, companies would raise at valuations of $50-$100 million, which meant they could raise $15- $30 million at the appropriate level of dilution. Once those valuations came down, companies have started raising $7 - $10 million funding rounds and the valuations have come down to $25 to $30 million — so it has become a bit more reasonable. This has happened but early stage funding deals are getting done.