VC fund 500 startups puts India on hold citing tax issues

Silicon Valley-based venture capital fund and accelerator 500 Startups has put on hold its plans to raise a $25 million India-focused fund, Kulfi, citing taxation and regulatory reasons. Run by Dave Mcclure, one of the most prolific seed investors in Silicon Valley, 500 Startups has recently seen the exit of key executives such as Pankaj Jain and Soaib Grewal. Jain was leading the Kulfi fund and Grewal managed its India investments.
“Due to recent moves by the India government regarding tax and regulatory environment, our India fund is on hold temporarily, until we have more clarity,” a 500 Startups spokesperson said in an emailed response to ET’s queries. Besides India, the Kulfi fund was also looking to invest in startups based in Sri Lanka and Bangladesh.
Jain has moved to an advisory role while Grewal wrapped up his contract at the end of year 2016, the email said. However, 500 Startups will continue to actively invest in India in 2017 and will be announcing three-four new investments here in the first quarter, the spokesperson said.
500 Startups had invested in around 60 Indian startups, some of which turned out to be successful, including ZipDial that was sold to Twitter and Little Eye Labs, acquired by Facebook. But some of the ventures it backed, such as food-tech startup Cucumbertown, travel portal Tushky and men’s apparel platform Seat14A.com, have shut shop.
In March 2015, 500 Startups had announced a plan to raise a $10-20 million fund focused on Indian startups under the name ‘Startupwallah’, but it never took off.
Globally, 500 Startups has invested in more than 1,000 ventures in over 50 countries since 2010. In India, it has backed a number of ventures including Instamojo, PriceBaba, Innovaccer, Sheroes.in, OnlineTyari and ZipDial.
“We have always been bullish on India and will continue to invest from our global funds,” said Shalini Prakash, who will be looking over 500 Startups’ India operations.
Prakash too said the venture capital firm has been evaluating two-three Indian startups for funding that it will announce in the first quarter of 2017.