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After running Xseed Partners, their first fund, for five years and investing in 25 startups, Ajay Jain and Deepesh Agarwal started their second investment fund Silverneedle Ventures, in 2022. Focussed on early stage, deep-tech startups, the Hyderabad-based firm is planning to invest Rs 100 crore in over 30 ventures in a span of 18 months.
In an exclusive interview with Analytics India Magazine, Ajay Jain spoke in depth about the current funding scenario in India while also touching upon the philosophy of the firm when investing in tech-based startups.
“India is well-equipped for the so-called funding winter,” said Jain on the rising inflation, risk of recession and its impact on the investing space. “We have been seeing trends for the last six months and fundraising has been actually amazing.” He said that 40 percent of the fund had already been subscribed within three months of the launch. The firm is looking to invest in Seed, Series-A, and Series-B startups.
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Silverneedle Ventures’ team comprises people from entrepreneurial and technological backgrounds enabling them to analyse the tech of the company while also preparing them for the market. Jain comes from a semiconductor background and shifted to the business side of things after finishing his MBA. Deepesh Agarwal, meanwhile, is from a capital market background. The team is ably held together by Sanjay Rastogi, a core technology person, and Abhishek Balendran, the one who looks at the metrics and numbers. The team is well-equipped to navigate the startups through different perspectives and arrive at a conclusion.
Originating from the IIT Hyderabad seed fund, the founders have an academic backing and can help the entrepreneurs reach these academic institutions for help in development of products. The firm has very strong LPs with CEOs of listed companies, creating a diverse and growth-oriented atmosphere for the startups.
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“It is important for me to know your story and why you are doing it,” said Jain. The firm calls itself a ‘Partner’ of the companies they invest in. “We chose the word ‘partner’ very carefully,” because Jain believes that the most important part about being an investor is understanding the approach of the founder and solving problems – with them. Founders need to explain why they are taking on the specific problem that they are solving.
‘The most important metric we consider before investing in a startup is the founder’
With Xseed Ventures, the team has made six AI-based investments with 25 investments and eight successful exits. Along the same lines, with Silverneedle Ventures, the team has invested in two startups so far – Knorish, a platform to sell webinars and courses to build businesses, founded by Kinner N Sacchdev and Rakhi Wadhwa; and Samaaro, an all-in-one platform for virtual events and their management, founded by Purnank Prakash and Mayank Banka.
The firm is interested in looking at innovations in the sustainability sector and the idea of smart cities with smarter connectivity gets them interested and AI can definitely help with that. Additionally, he says sectors like health, cybersecurity, and finance should see more innovations with AI in the future.
In AI, the firm focuses on startups that are building for automation, safer and effective data exchange, and metaverse for formal and informal setting. “We have seen NLP software achieve great success. Indian engineers should focus on building deeper technologies for the regional languages for this would be a very interesting space,” said Jain.
“Though we would like to use AI/ML in our firm in the future, currently we are in the formation stage of the fund,” he said explaining why they believe investing and managing the entrepreneurial sector requires a more human touch in the beginning. “We also want to give comfort to the founders that we will take them to the next few rounds of investing.”
‘Founders need to understand that problem-solving is still a business model’
“Technology should be embraced with an idea of business,” said Jain, explaining why entrepreneurs should focus on the market for the product along with building complex technologies. “As smart as Elon Musk is, he is also smart in the business side of things.”
Jain gives an example of two companies that are taking the technology innovations race very differently. One that is deep into technology to solve problems with research and the other is focused on applications and the industry. Silverneedle chose the second one as it believes in investing in companies with an interplay of technology and business.
“The most important thing that entrepreneurs lack today is simplicity. Using AI/ML jargon will not matter if you cannot explain what your product exactly solves,” said Jain. “If you cannot explain the idea to me simply, then you haven’t understood it yourself.”
Jain shares his learning from the investing field saying founders should be in control of what is happening in their startup and navigate in the right direction even as they scale up. “We are not in a hurry to exit from a startup. It is in the end a patient capital.” Jain concludes by saying that the founders should have an open mind and be keen to learn and discover as they grow while also sticking to the idea that they started with.