India's largest venture capital funds are creating a platform to support, co-invest and bail out portfolio startups hit by the coronavirus outbreak, said three people on condition of anonymity.
VC funds including Sequoia Capital, Accel, Lightspeed Venture Partners and Matrix Partners India, which have over $8 billion in assets under management (AUM) in India combined, are currently finalising the plan. They which may involve a neutral third-party for decision making on where to invest, a source said. Other funds are expected to join in as well.
Sequoia, Accel and Lightspeed declined to comment while Matrix did not respond to our email seeking comment.
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“The objective is to create a support system and share best practices across the board, where founders can reach out to any of the investors for help and knowledge, not just their own investors,” a person involved in negotiations said.
The plan also underlines the severity of novel coronavirus, which has claimed 19 so far in India. Cases have grown 40 percent to 794 in the last two days alone. COVID-19 has also triggered a 21-day lockdown in India, which began on March 25.
"This is a huge event and this platform is meant to be investor agnostic, so that all companies which need capital and support get it without biases," the person added.
Travel, hospitality, food delivery and online retail have been some of the worst-hit sectors and VC funds have significant exposure in these sectors. For instance, Matrix is an investor in cab hailing firm Ola, hotel chain Treebo and scooter-rental firm Vogo, while Accel is an investor in ticketing firm BookMyShow, food delivery firm Swiggy and hotel brand Fab Hotels.
Sequoia's companies include food delivery firm Zomato, scooter-rental firm Bounce, and online grocer Grofers, while Lightspeed’s companies that could be impacted include logistics firm Freight Tiger, bus commute app Shuttl and cloud kitchen firm Freshmenu.
While these funds all have co-investments and common portfolio firms, this would be the first official coming together of these large global VC funds in India to tackle the COVID-19 situation.
Other VC funds could also join in coming days, and while knowledge sharing and support is a large part of the platform, a small fund may be included as well. The initiative could be officially announced as soon as next week, a source added.
The coronavirus outbreak has changed plans for venture capitalists overnight as they have been forced to postpone their own deployment of funds. They are trying to create a longer cash runway for companies and taking quick decisions related to pending and future deals.
Earlier this month, Silicon Valley-based Sequoia sent all its founders an ominously titled 'Black Swan' note, warning that it could be several quarters or longer before the global economy shows any signs of recovery from COVID-19. ‘Black swans’ are rare, unexpected events that heavily influence global activity.
VCs and entrepreneurs have been doing webcasts and Zoom calls to answer the most pressing questions and issues regarding the virus.Also Read: Coronavirus pandemic: How should startups deal with Covid-19 fallout?