With a surfeit of money available, venturecapital funds are competing for seed deals, erasing long-held distinctions in the world of startup investing.Seed, typically the earliest investment in a startup, is no longer the territory of and dedicated seed funds. Stealthily, big-ticket venture capital funds that normally make large bets in are writing smaller cheques to younger companies as well, marking a tectonic shift in investment dynamics.

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“Investors are playing across the entire funding continuum because nobody wants to miss out—the FOMO (fear of missing out) effect,” said Sanjay Anandaram, venture partner at Seedfund and an adviser at software product think-tank iSPIRT. “These firms are able to seed the seedlings as they grow and cherry pick the ones that they really want to back with big bucks.” While venture capital firms in India have always invested seed money on occasion, a clear trend emerged in mid-2014 when a handful put in more than a dozen such. ET, in a survey conducted in collaboration with startup analytics firm Tracxn, found that institutional funds and angel investors now have similar leverage with looking to raise seed rounds. Prior ET research found that in 2014 major VCs had closed more than 60 seed cheques of up to Rs 5-6 crore apiece.

This means expanded options for entrepreneurs, said Rehan Yar Khan, serial entrepreneur who leads early-stage fund Orios Venture Partners. “They can now choose between taking less money at a low dilution from smaller funds or taking more money at a higher dilution from larger funds,” he said. “Angels are seeing fewer deals as a result and are having to come in even earlier, often at the ideation stage.”. Startup founders appear to welcome this development. Not only do large venture capital funds offer experienced operations teams that can help early-stage companies scale at speed, the brand recognition that comes with being backed by a reputable name can go to lengths in a ruthlessly competitive startup ecosystem.

And then there is the potential of follow-on funding that is hard to ignore. This shift has upped the average ticket size and now seed-stage cheques range from as small as $100,000 (about Rs 65 lakh) to $1 million, often resulting in founders raising more money than they need. “There are a lot of funds (or micro funds) coming up who are competing with institutional investors for early-stage deals, so it’s made the environment more competitive,” said Shanti Mohan, founder and CEO, LetsVenture, a deal discovery platform for earlystage deals. The downsides can be equally painful, said Abhishek Goyal, cofounder of Tracxn. “This will allow entrepreneurs to have significant capital in early days and hence scale their companies quickly.

(But) the biggest risk is that startups may scale a lot before figuring out product-market fit and run into the risk of getting caught on the wrong foot,” he said. Also, if a startup is struggling or the market has changed and an institutional investor doesn’t want to reinvest, “it’s doomsday for an entrepreneur,” said Mohan of LetsVenture. “The signaling effect is very strong with institutional investors.”. SEQUOIA CAPITAL Shailendra Singh, Managing Director SEED PORTFOLIO: Practo, Mobikwik, TinyOwl, Moonfrog Labs, Pine Labs, Glocal Sequoia Capital that has been investing in India since 2006 has backed some of the country’s most-touted startups— Ola, Zomato, Druva, and FreeCharge, which was acquired by ecommerce major Snapdeal in a landmark acquisition deal this year.

The venture fund, which typically invests in earlyto growth-stage startups, has become quite active in seed-stage deals, writing cheques as low as $100,000. Some of its seed investments— including Practo, Grofers, and PepperTap—have gone on to raise follow-on rounds from other institutional investors. “We often invest very early in companies with a goal to partner with world-class entrepreneurs in solving large problems,” said Shailendra Singh, managing director, Sequoia Capital India Advisors.

The venture capital firm brings a ‘company building’ mindset along with functional help in recruiting, marketing, and technology to the table to help young companies succeed, said Singh. Sequoia Capital India was the most active investor in Asia between April and June, according to data by CB Insights, a global database for angel and venture capital activity.

ACCEL PARTNERS Subrata Mitra, Partner SEED PORTFOLIO: Portea, MySmartPrice, Swiggy Accel Partners, a California-headquartered venture capital firm, has made over 70 seed-stage investments in India since 2004, including in successes such as Flipkart and Freshdesk. Today, 65-70% of its checks are made at the seed level, each between $250,000 and $2 million. The firm expects to close at least 20 seed investments in India this year.

“We believe the best opportunity to create outstanding assets is in seed/early stage,” said Subrata Mitra, partner at Accel India, adding that this is not an easy stage to execute. “The India market is in its formative stages in its startup ecosystem and maximum value creation for our investors is possible by participating in seed- and early-stage companies.” Accel’s portfolio is made up of tech companies disrupting large markets in the consumer, healthcare and enterprise industries. Most of the team hails from entrepreneurial or operational backgrounds, and their core competencies lie in the pillars of seed investing— identifying and building quality teams, understanding the value of early DNA setting, and helping companies get product-market fit. Accel has an operating team comprising experts in product management, marketing, design and technology and dedicated to helping portfolio companies grow faster. BLUME VENTURES Karthik Reddy, Managing Partner SEED PORTFOLIO: Instamojo, Explara, Roadrunnr, Zopper, GreyOrange Seed-stage venture fund Blume Ventures, set up in March 2011, has made early bets in 70 companies with its first fund of Rs 140 crore, and has exited 12 of these, including ZipDial and TaxiForSure. “This is the stage of investing we enjoy the most,” said managing partner Karthik Reddy. “We like to work with founders at an early stage of an idea and help in whatever way we can to build various elements of a potentially great company—founder mentoring, hiring, direction and choices around business models.” Blume makes its bets around energy efficiency, manufacturing and healthcare technology.

Ticket sizes are mostly of $500,000 to $1 million, with Blume usually taking 50-80% of the round. Blume helps founders solve typical early-stage startup problems and acts as partners. The firm plans to make 10 investments this year from its new $60-million (about Rs 390 crore) fund that is slated to close later this year. One-third of its deployable capital will be for seed investments in startups, and the balance will be for follow-on investments into the best of those.