The Godzilla VCs are forcing a strategic shift for Blume’s second fund. Here’s how

The Indian startup ecosystem is far more vibrant now than it was three years ago. Two or more startups are sprouting every day, and there are accelerators, incubators, angel groups, and seed funds vying for the smartest of the lot.

The biggies in the VC space are now getting into early stage investments too. So, while the new vibrancy is good, it can be dangerous for entrepreneurs and smaller funds too, says Karthik Reddy, managing partner of Blume Ventures. It’s a leading early stage investor in India, with a portfolio of over 60 tech startups.

Reddy explains:

Incursions into the US$500,000 to US$1 million range by a plethora of series A and B VCs to buy optionality is a little scary… We don’t know if these VCs are allies in company-building any more; they don’t seem to care about folks like us co-investing and helping manage the early stage companies. Are they going to build the skills internally to help seed companies? It’s great if they are, but what they’re signaling to us is that they’re looking to eat our lunch, not collaborate.

From past investments like InMobi, TaxiForSure, and ZipDial, to newer ones like Explara, WebEngage, and NowFloats, Blume has notched up a string of potential winners.

But now, four years down the line, as Blume prepares to launch its second fund in this rapidly evolving ecosystem, Reddy and the team are taking a hard relook at its investment strategy. “We need to step out of our angel avatar and delve deeper into emerging winners,” says Karthik Reddy in an interview with Tech in Asia on Blume’s experience in the last four years, and why this VC feels the need to pivot now.

Here are excerpts from the interview with Reddy:

TIA: Blume believes in contributing much more than money to startups. Tell us how you engage with portfolio companies to get them over humps on the startup road.

Reddy: At the stages we enter, it’s seldom about the capital alone. We get called for anything and everything – and we can’t possibly have the answers to all those questions. We’ve solved some of them with an internal group of founders – it’s a simple Google Group that sees a wide variety of questions answered. But we will have to iterate this ‘mini internal Quora’ to the next level soon – within the coming year.

Currently, it’s the First Round Capital model – building a system where the startups can all learn from each other. The next grander iteration is the Andreesen Horowitz variant. We can’t have a 100-person expert team across all segments, but we will strive to build partnerships with nimble service providers who are aligned long-term with Blume. We already have a handful – they help in various aspects such as handling mobile partnerships, fund-raising, accounting, documentation, legal, due diligence, etc.

TIA: What do you and the core team do?

Reddy: Business development and channel relationships, VC connects, cross-border connects, advisor pool connects. We’re orchestrators of this grand ensemble. There is no end to this… and we want to keep building.