Golden Sparrow - Q3, 2024 Newsletter
Golden Sparrow is an $8 million India-focused, early-stage fund. We invest in Rare Birds across SaaS, AI, and Deep Tech.
“It’s the difference between having a snapshot or a video. When you’re an active investor, you’re part of the video as it's playing.” – Frank Rotman
Portfolio Construction
We are active investors in 11 companies. Over the past 16 months, Golden Sparrow has deployed 49% of its capital. We anticipate adding seven further investments in 2025. We have reserved 15-20% of capital for doubling down on our best founders, those whose “videos” we have watched every day since committing.
Our fund size drives our strategy. We believe that being small, relatively sector agnostic, and focused on early-stage will ultimately maximize returns to LPs.
Our North Star remains returning at least 3x the fund, net of fees. We often get asked about exposure to specific industries or why our portfolio construction went from our planned 30% exposure to Deep Tech to 50%. While we remain well diversified across sectors, frankly, we don't think it’s the right question. The direction was set at the beginning. Every decision we make is aligned with spotting, seeding, and supporting founders who can give us the conviction to deliver an outsized return. With 16-18 planned investments and current median ownership of 3.1%, we need one $900 million exit, assuming no dilution or double downs.
Outliers is all that matters.
That being said, we are tracking the progress of our portfolio and whether they are on the way to that North Star. For SaaS, a better question is, “What is their latest ARR?” For Deep Tech, we ask, “What major milestone was achieved?” Have there been new funding rounds at higher valuations? We also believe that having the right set of co-investors matters.
By The Numbers
LPs in the fund: 62 (fund is fully subscribed)
Number of investments committed to (vs. 9 in Q2): 11
Number of Deep Tech investments: 5
Number of AI investments: 2
Number of SaaS investments: 2
Number of DevInfra investments: 2
% of fund deployed (vs. 37% in Q2): 49%
1:1 founder discussions held (vs. 264 in Q2): 184
Due Diligences conducted: 8
% of the fund controlled by female LPs: 28%
Expert Venture Partners: 6
Full-time talent at the fund: 3
Founders
Our fund is 49% deployed across 11 investments, adding two new companies this quarter: a Quantum Computing startup and Cygenica, a molecular drug carrier. We also revealed our investment in a rocket company.
EtherealX
EtherealX, our medium-lift rocket startup, has gained international attention after being featured in Techcrunch. Having met all of its ignition and initial engine tests, we look forward to their Series A next year.
Cygenica
Dr. Sanghamitra's innovative GEENIE platform is set to revolutionize drug delivery. With significant patents and exciting preclinical data, it is positioned to disrupt the genomic medicine market. Our Venture Partner and specialist in this field, JB Michel, will support Cygenica towards its Series A as an advisor.
Quantum (unannounced)
We are excited to announce an investment in photonic quantum computing. Founded in 2021 by serial entrepreneurs, the 15-member team, including six Ph.D.s, collaborates with IITM and IISc. With two patents secured, they are solving optimization problems across finance, logistics, and telecom, addressing a $40 billion market. Their optical Ising Machine will be commercialized first, with a photonic quantum computer planned in 4-5 years. Pi Ventures is leading the investment.
Team
We have added JB Michel and Quentin Staes-Polet as expert Venture Partners in Biotech and Gaming respectively.
I met Quentin in 2009, at over 4000 meters of altitude in Gulmarg, Kashmir. He brings years of experience in Gaming and Media. Up until recently, he was the CEO of Unreal Engine and managed Epic Games’ (7th largest gaming company) international operations.
JB Michel founded Patch Biosciences after completing his Master’s and PhD at Harvard. His gene therapy and AI startup, backed by Andreessen Horowitz, was acquired in 2024. JB’s ability to blend science with real-world biotech startup challenges makes him an ideal advisor for companies like Cygenica, which is part of our portfolio.
Anand Rao (AI), Michael Marmor (SaaS and DevTools), Ashwin Kandoi (Blockchain and Fintech infra) and Venkat Raju (Deep Tech) continue to be actively involved as experts.
After nine months with us as an analyst, Ritik is moving to another fund. His departure was early in our journey. Our team screened over 500 candidates with his support and found Shrey best suited. With a degree in Aeronautical engineering from IIT Kharagpur and experience at Amex, he combines both the analytical and raw passion to help us find the next outlier.
Near Death
A good VC fund manager needs nerves of steel.
We led PyjamaHR’s pre-seed round in April 2023, despite no other funds showing interest in yet another HR application tracking system.
We backed Harpreet for his unmatched determination and deep understanding of customer pain points.
By February 2024, with no revenue and depleted funds, he invested his own money to continue. Targeting the African-American recruitment market in the US proved pivotal. He regularly spent his evenings speaking with recruitment agents from the healthcare and call center industries. Without spending a rupee in marketing, he now has 370 paying clients and $250K of ARR. He is beginning to see India’s global SaaS potential and expanding into a AI recruitment suite.
India’s blistering growth and stable politics
On September 3rd, the World Bank updated its GDP forecast for India, raising it from 6.6% to 7.0% for the current financial year.
Modi remains resolute in his vision to transform India into a developed nation by 2047, but his third term presents complexities beyond what meets the eye. While exit polls predicted a sweeping victory for the BJP, with 340 out of 543 seats, the party secured only 240, forming a coalition government to maintain power. Ranked 111th out of 125 countries on the Global Hunger Index, the nation grapples with 16% youth unemployment. Only 100 million formal jobs are reported, with much of the population depending on casual work or remaining unemployed.
Despite these issues, the stock market is having a “dream run”. India now boasts over 150 million investors, a number that has more than tripled since 2020.
The Red Hot Market
The Nifty 50 index has surged 2.5x over the past five years, outpacing major indices like the S&P 500. India’s stock exchanges have introduced new derivative products and reduced the minimum sizes for option trading, sparking a wave of retail investor activity.
India now exceeds China in the MSCI All-Country World Index, with a 2.33% share compared to China’s 2.06%, making it the sixth-largest weighting. This reflects India’s booming stock market and global investors increasing exposure as China faces economic challenges.
The Nifty 50 has hit record highs, driven by the country’s strongest GDP growth and inflows of $38bn from local investors. Major IPOs, such as Ola Electric and Bajaj Housing Finance, have taken advantage of this surge, with more than $38bn raised on its equity market this year—the highest in Asia.
Alarmingly, Nifty 50 option trading volumes have averaged $1.64 trillion a day this year, surpassing the S&P 500’s $1.44 trillion.
While we remain bullish on India, these numbers give us pause regarding the potential impact on leveraged risk and volatility in the event of a correction.
Indian Venture Capital
India remains the second-largest destination for VC and growth funding in Asia-Pacific, just behind China. Indian startup funding surged by 53% in the first eight months of 2024, although the 2023 base was already half of 2022.
A total of 780 venture capital deals worth $7.5 billion were announced between January and August 2024. Zepto, the Indian quick-commerce startup, stands out in its $1 billion funding raise. Other important raises include Meesho’s $300 million and PharmEasy’s $216 million funding rounds.
Paul Graham’s piece on founder-led vs. professionally-led businesses resonated deeply with me, especially given my background in a family business that has undergone professionalisation.
Thank you for being with us on this journey.
See you here next quarter.
Rishaad
