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Venture capital firm Andreessen Horowitz (a16z) has revealed that it plans to invest $500 million in Indian startups.
The Silicon Valley-based VC firm Andreessen Horowitz made its first investment in India last year by leading a funding round for local cryptocurrency exchange CoinSwitch Kuber. The round, which closed in October, raised $260 million at a valuation of $1.9 billion. Following this, tweets from partners at the firm indicated that more investment into the Indian market was yet to come.
According to TechCrunch, a16z will be hiring local investment talent. Partners at the firm have also been reportedly courting local startups in recent months. One is a Bengaluru-based early-stage financial tech firm. The other is a startup that runs an opinion-sharing platform and is valued at around $250 million.
The Allure and Challenge of Investing in Emerging Markets
The Indian market, with its population estimated at over 1.4 billion, has been on the receiving end of investor attention. Over the past ten years, tech giants Alphabet Inc (NASDAQ: GOOGL), Meta Platforms (NASDAQ: FB) and Amazon.com Inc (NASDAQ: AMZN) have invested a minimum combined total of $20 billion in the country. Data by PitchBook suggests that VCs invested $23.5 billion in local startups in 2021 thereby creating 17 unicorns. $587.16 million of this is reported to have been invested in Web3-focused firms.
Andreessen Horowitz has been looking to expand the scope of its investments over the years while remaining cognizant of the challenges involved. Co-founder and General Partner Marc Andreessen speaking at Stanford Graduate School of Business six years ago commented on this. While acknowledging the allure of investing in startups based in emerging markets, Andreessen described VC investing as a “very hands-on process of understanding the people you’re working with for both evaluating the company and work with the company.”
He added, “if it continues to be a hands-on business like that then there is the problem of geographic remoteness, which is if I’m not present in another geography, do I really know those people to make the decisions. So what a bunch of firms have been trying to do is staff local teams. But then there’s the fundamental problem that if the local team is really good, then they can easily leave and run their own firms. If they are bad, they stay working for me…which has its own issues.”
Firms such as Sequoia, Lightspeed, and Accel have been active in the country for more than a decade while others, including Bessemer Venture Partners, General Catalyst, Insight Partners, B Capital, Ribbit Capital, Dragoneer and D1, have been working to increase their activity locally.
SoftBank (TYO: 9984) and Tiger Global have also made enormous investments in Indian startups. SoftBank invested over $3 billion in 2021 and could potentially invest up to $10 billion this year. Tiger Global is responsible for the creation of over 20 unicorns in the country in the past 18 months.