Sparrow Capital looks to raise Rs 400 crore in third fund

The fundraise will also give Sparrow Capital more comfort in increasing its cheque sizes from the current range of Rs 2-5 crore in each company.

Sparrow Capital, an early-stage sector agnostic venture capital (VC) firm, is finalising plans to raise Rs 400 crore (around $50 million) in its third fund, sources said, as an increasing number of investors raise monies and add to the dry powder available in the world’s third-largest startup ecosystem.

This will be the Bengaluru-based VC firm’s third fund since being founded in 2020. It raised just Rs 4 crore in its first-ever fund but went on to secure Rs 150 crore in its second fund as it moved beyond angel investing.

The third fund, which will be finalised in the coming months, will allow Sparrow Capital to become a more competitive VC fund and bet more aggressively on high potential founders. It will also give the investor more comfort in increasing their cheque sizes from the current Rs 2-5 crore range in each company.

Sparrow Capital did not reply to Moneycontrol queries .

The fund, started by former Kalaari Capital employees Darshit Vora and Yash Jain along with Aakash Goyal, who was at Fundamentum Partnership, has invested in more than 30 companies since its inception. It has backed Aukera, 91Trucks, GoKwik, Gushwork and several others firms.

More dry powder

Sparrow Capital’s latest fundraise comes at a time when India-focused venture capital firms have doubled down on fundraising efforts after a year-long pause, as investors look to deploy the large pools of reserves they have been sitting on.

After VC fundraising slipped to a five-year low in 2024, several global as well as domestic investment firms have announced large funds this year, spurred on by India’s strong startup initial public offering (IPO) pipeline and a recovering funding landscape.

Since the beginning of this year, a slew of VC firms, similar to the size of Sparrow Capital, have raised fresh capital.

IndiGo Ventures announced the first close of its maiden fund at Rs 450 crore (around $54 million). More recently, All In Capital announced the first close of its second fund, with a target corpus of Rs 200 crore (around $24 million). Finvolve Ventures too has similar fundraising plans.

Even larger funds have been in the market to raise new funds. In April, Moneycontrol reported that Fireside Ventures is in talks to raise $230 million for its fourth fund.

In January, investment major Accel raised a record $650 million (around Rs 5,500 crore) for its eighth India fund. Accel joined Silicon Valley-based Bessemer Venture Partners, which, in the previous  week, launched its second India-focused fund with a corpus of $350 million, over 50 percent higher than its first India fund of $220 million launched in 2021.

Similarly, domestic early-stage investment firms such as Cornerstone VC and Prime Venture Partners have raised funds at $200 million and $100 million, respectively. Others like Eximius Ventures and SamVed VC have managed to close smaller funds of $30-50 million since the start of this year.