Role of micro-VCs in innovation driven entrepreneurship and economic growth
Since time immemorial entrepreneurs have had ideas, but unfortunately found it a difficult process to raise the capital to scale themselves. Micro VCs thus evolved as a response to bridge that gap and supported start-ups that have today become a name to reckon with such as Apple, Amazon, Flipkart and many more. By unlocking the potential with funding that nurtures, micro-VCs have come to be one of the key reasons why the Indian start-up ecosystem has grown so tremendously.
India has cemented its position as the third largest start-up ecosystem in the world and has been churning out unicorns even while reeling from and battling the pandemic. While the laurels are largely shouldered by giant VCs and PE firms, the contribution of micro-VCs is evidently overshadowed. It is much akin to the story of David and Goliath, that we always go back to on numerous occasions- even though large VCs have lent to the ecosystem growth, the role of micro-VCs is a story to tell!
Since established capital firms overlook small business opportunities due to high risk, lack of trust, small scale etc, micro-VCs have emerged as the unsung heroes by betting on novice aspiring entrepreneurs. They have now nestled themselves among the pool of accelerators, incubators and the behemoth VC firms. According to a report by the Indian Private Equity and Venture Capital Association (IVCA), Amazon Web Services, and Praxis Global Alliance, the number of micro-VC funds has increased to 88 in 2020 from nimble 29 in 2014 in India.
Hungry for ideas
With a comparatively smaller fund size micro-VCs are not just supporting India’s next gen innovation first approach entrepreneurs but are also ready as preceptors for start-ups that project and represent a different future. With the correct experience they are supporting India’s next generation of companies by combining strong market knowledge with subject experts. Micro VCs are slowly but steadily finding their footing as critical pillars of India’s dynamic growth story. This new breed of micro-VCs place vertical growth at the forefront and believe in ideas that possess the power to break the clutter and pave their way into the hall of fame!
Reinventing the wheel of economy
As spoken about, the Indian start-up ecosystem has witnessed remarkable growth in the past decade and is hailed as one of the key drivers to help dart towards the country’s ambitious economic targets. This not only translates into new business opportunities, but also the creation of job opportunities across numerous diverse sectors. Tech start-ups that were born to satiate the growing demand and shift in consumer habits towards digital adoption are hiring heavily to meet this increased requirement.
A recent SaaSBOOMi study by McKinsey & Company noted that not only do Indian SaaS companies have the potential to create $1 trillion in value but also create half a million new jobs by 2030. As the country’s accelerating start-up activity is spreading its wings beyond traditional locations into regional economies, start-ups catering to and operating in tier 3 and 4 cities too are generating manifold employment opportunities. With the rise of micro rural entrepreneurship, many who lost their livelihood in urban areas amidst the pandemic, were able to find successful employment opportunities without having to undergo migration hassles.
Future ‘micro’ giants
As micro-VCs continue to bridge the gap between proof of concept and product-market fit, success stories keep embedding with each passing day. Apart from being the steppingstone for start-ups with long term potential, micro-VCs have shaped the start-up ecosystem into the powerhouse it is today. This is just the humble beginning, and our country is indeed poised to show how our micro-VC ecosystem will take on the responsibilities head-on to grow the economy.
