“Going through this kind of experience helped me buy into Web3. Web3 seems like a herd mentality now, but for us, it’s more about our philosophical belief in decentralized Internet infrastructure for the future. Domkundwar, chief executive officer of the pre-seed-focused investment firm, said in an interview with VCCircle.
Web3 stands for a decentralized version of the Internet that runs on peer-to-peer technologies such as public blockchains and has now become one of the most sought-after new age themes among venture capital investors.
Better Capital, which made its first bet in India in 2018 with an investment in Neo banking startup Open, has become one of the most active and leading early stage investors with a focus on pre-seed deals. Last year at fintech startup Slice it got its first Unicorn, a private company that was valued at more than $1 billion. According to its 2021 annual report, the investment firm made 156 deals, of which 80 were new investments. Of the new deals, Better Capital invested in nine cryptocurrency/Web3 companies in 2021.
Domkundwar said Better Capital will double down on the cryptocurrency/web3 space this year with a global lens and focus on what the web2 to web3 transition can mean and include.
“I’m not saying what we’re going to find in Web 3, but what we’re going to build in Web 3. Unless we make Web3 simple for users, there won’t be an unlock for billions of users ” This year, Better Capital’s investment in crypto native social platform Sahicoin has already been announced.
On the other hand, Better Capital will be slow on its new investments in the edtech space, Domkundwar said. Better Capital was among early-stage investors who took a contrasting view on the edtech space in 2020, when the Covid-19 pandemic hit. There was an aversion among a section of investors that there was no white space in the edtech space for early-stage bets and that most investments would go only to growth-stage edtech companies.
“When people say there is no white space, they are basically saying that no one will be funded in edtech in India, which is what my friends also said. It is great to hear because I love it. I figured if I was going to be right then I wouldn’t be competing.” In its 2020 annual letter, it said it made big bets on edtech during the year and called it edtech 2.0. of India. That year, Better Capital’s investments in edtech and global software-as-a-service topped its sectoral charts with eight deals. In 2021, while the investment firm made 11 more new edtech deals, it topped by doing more fintech and SaaS deals at 13 and 18, respectively.
Domkundwar explained that its edtech investments fall under three buckets: infra (Teachmint and Toddl), K12 (Filo, Kutuki, and Uday), and those of professionals and employment-driven skilling (Stoa, GrowthX, Jovian, SkillLink). for Cohort-Based True Learning, Airblack, and Palash).
“Finding out what else is new in edtech is the hard part so we can be slow or someone has to show me the proof. I think web3 is an edtech opportunity.”
Domkundwar said fintech and SaaS investments will remain the bread and butter for the firm, while it is also committed to the healthtech and agritech segments.
Better Capital’s first unicorn, Slice, was one of a record 40-plus unicorns created in India last year, compared to just 11 in 2020. Other portfolio firms of the investment firm that could soon become a unicorn include Rupeck, KhataBook, Open, Jupiter and M2P. , all from the fintech space and from the TeachMint edtech segment, as they have a valuation of over $500 million.
Domkundwar was in the US before Better Capital was launched in India in 2018. After completing his Masters from the University of Berkeley in 1998, he worked with i2 Technologies. He later started the venture-backed startup, Romware. He came to India in 2012 and said that he needed to recalculate as India was a business-first ecosystem primarily because TAM (total addressable market) was low, while he is generally a product first person, Domkundwar is remembered. Around that time, he started two parties, one in the US and the other in India, of which Rupeck was the largest candidate. The turning point was the launch of Mukesh Ambani-led telecom firm Reliance Jio, which replaced TAM as internet became available cheaply. He then decided to launch Better Capital in 2018. “After Jio, I thought I could build a product first model by partnering with the right founders,” he said.
Post launch, Better Capital along with a group of 30-50 limited partners started investing through the Special Purpose Vehicle (SPV) model, where you make one SPV for every investment. The SPV deployed approximately $35-40 million in total. Last year, the investment firm raised $15.2 million in its first fund (based in the US). It expects to raise such funds of $25 million after every 18 months.
Domkundwar said Better Capital aims to launch a growth fund to invest in its existing portfolio companies as they grow. “We want to be creative about the structure of the growth fund but nothing has been finalized yet.
Domkundwar, without naming the companies, said that Better Capital has recorded six full and partial exits with return multiples ranging from 2x to 100x.
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