The last 12-18 months have seen the rise of several specialist venture capital and private equity firms that are investing in only one niche sector such as climate, proptech, gaming, health tech, transport tech, among others. According to Tracxn, the number of such firms that are mostly investing in early-stage startups is around 511. Speciale Invest (deeptech), Transition VC (energy transition), Green Frontier (climate tech), Dallas VC (enterprise tech), Spyre VC (proptech), Climate Angels (climate) and Dream Capital (gaming) are some such funds among others.
For instance, last month, Optimistic Capital, an alternative investment firm launched a Rs 200-crore fund to invest in the microbrewery sector. “This is a function of depth and maturity of certain sectors as more and more consumers (demand side) and founders (supply side) flock towards niche sub-sectors,” Namit Chugh, principal, W Health Ventures, told FE. The firm invests in healthtech and has startups such as Wysa, BeatO, Good Health Company, Mylo in its portfolio.
“As limited partners (LPs) of Indian VC firms are maturing with time, they can understand what sector-focused firms bring to the table, which is different from traditional VCs,” Abhimanyu Bisht, operating partner, Spyre PropTech VC, said. The firm launched its first fund this year and is in late-stage conversations with startups that are building technologies for the real estate sector, including residential and commercial spaces, institutional spaces like schools, hospitals, hotels, industrial spaces like factories and warehouses.
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Experts also say that regulatory tailwinds especially for industries like fintech, climate tech and health tech, where the government focuses on digitisation, inclusion and public infra are on the rise, which is prompting the rise of more such firms.
Focusing on just one sector allows these firms to develop deep expertise and insights, enabling more informed investment decisions and targeted guidance for portfolio companies. It also allows them to make extensive industry connections and create a network of mentors and experts. For instance, W Health Ventures has put together a network of doctors and healthcare operators to help their portfolio companies build in the space.
“Vertically integrated within the ecosystem, we are well connected to domain experts and corporates in the energy transition sector,” Mohammed Shoeb Ali, co-founder and managing partner, Transition VC, said. Investors in the space also say that contrary to what some expect, the specialist firms’ focused approach can help reduce diversification risk. “Our concentrated knowledge allows us to build a portfolio of high-conviction opportunities within our chosen field,” Bisht said.
