India has to change the way it looks at risk capital: Rukam Capital’s Archana Jahagirdar

Startups have become an integral part of entrepreneurship and today, India is the third largest startup ecosystem in the world with about 140,000 startups as of June 30, 2024.

Venture capital firms are powering this growth.

Rukam Capital is one such VC. Launched in 2019 by founder Archana Jahagirdar, the early-stage venture fund has backed online coffee brand Sleepy Owl and beauty brand Pilgrim. The firm exited Pilgrim in 2023 with 5.36X return within two years of investment in the company.

Jahagirdar is part of the organising committee for the second edition of Startup Mahakumbh which is bringing together over 3000 startups and over 1,000 investors to discuss and fuel entrepreneurial ideas and growth at Bharat Mandapam, New Delhi.

YourStory spoke with Jahagirdar to understand the rising role of VC firms in the startup ecosystem and how the stigma attached to risk capital needs to undergo further change in the country today.

Edited excerpts:

YourStory (YS): What are some of the factors that are working for India in terms of fostering entrepreneurship?

Archana Jahagirdar (AJ): India is starting to see the benefits of its demographic dividend. While some debate whether it will be a net positive or negative, the shift has been largely beneficial so far.

Gen Z and, to some extent, millennials think differently from their previous generations—they are far less risk-averse. This is mainly because India’s middle class is no longer in a survival mode. With financial stability, parents are comparatively supportive of unconventional career choices.

Earlier, career decisions—much like personal ones—were heavily influenced by family expectations. People who wanted to pursue sports or music were often forced onto conventional paths by families.

Similarly, entrepreneurship frowned upon. Success was defined by securing an IIT or IIM degree, landing a job at a multinational corporation, and following a stable, linear career path. This ensured financial security—buying a home, affording car loans, and funding children’s education. However, a rise in per capita income has reshaped these perceptions.

Moreover, government intervention since 2016 has also played a crucial role. Unlike in the West, where career choices are largely personal, government backing in India acts as a stamp of approval. Policies supporting startups have created a sense of security, making entrepreneurship a more viable option. The convergence of the right policies with a risk-taking, financially stable generation has driven this transformation.

YS: What challenges does Rukam Capital, and the VC ecosystem in general, faces?

AJ: Venture capital is still not a widely accepted asset class in India. Indians have traditionally preferred real estate, gold, and, more recently, mutual funds and the stock market. But VCs remain, in my opinion, misunderstood, leading to shallow commentary—especially after the BYJU’S debacle.

One common misconception is that VCs fund loss-making companies recklessly. But that’s precisely the point of a VC firm—to provide risk capital.

A startup needs to scale fast to secure market share before competitors flood in and growth often means losses in its early years. This is similar to traditional businesses that were once built on bank loans or community funding. India never had structured risk capital until recently, so we should celebrate it and not dismiss it.

VC investing is tough. Unlike operating businesses, it demands significant upfront capital, and returns often take years. Even in public markets, companies raise funds through QIPs for expansion—no business is profitable from day one. The real challenge is bridging this knowledge gap and shifting the mindset around risk capital’s role in building businesses.

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YS: Is the trend shifting back to early-stage funding this year, given the recent increase in early-stage deals?

AJ: India has plenty of early-stage capital from angels and micro VCs, but later-stage funding has long relied on global giants like Tiger, SoftBank, and Prosus. It is almost paradoxical. And with many of these global firms stepping back, the funding gap is glaring. Their exits weren’t about India’s potential but their own shifting strategies, yet their absence triggered a funding winter.

What India needs is its own Tiger Global, its own SoftBank—domestic growth-stage investors who can stabilise the ecosystem. The stock market saw a similar transformation; once swayed by foreign investors, it’s now anchored by active retail participation. Private markets need that same resilience.

That’s why events like Startup Mahakumbh matter—global investors often say they don’t “get” India. Instead of chasing them abroad, we need to bring them here to experience the scale and energy firsthand. Sovereign funds like Temasek and PIF are active, but more need to back Indian startups and keep innovation and wealth creation within the country.

Look at Swiggy, Zomato, and the quick commerce boom. These companies found unique Indian problems, and solved it using technology that is built and scaled here. The opportunity is massive, but the ecosystem needs long-term, homegrown capital to realize its full potential.

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YS: How capable do you think domestic capital is of making big-ticket infusions into startups today?

AJ: Demand will drive supply—it’s only a matter of time before India’s pools of capital get unlocked. A huge chunk of institutional capital remains untapped, largely because India is still wrapping its head around venture capital as an asset class.

Institutional investors have a higher fiduciary responsibility—they're not managing personal wealth, so their caution is understandable. Unlike family offices, they ask tougher questions, and rightfully so. That’s where events like Startup Mahakumbh play a role—working with the government and private sector to build trust, educate stakeholders, and address these concerns.

For India to have its own SoftBank or Tiger Global, large institutions must participate. Unlike the U.S., we don’t have massive endowments like Harvard or Stanford feeding into VC funds. But we do have institutions with deep reserves. The key is bridging the knowledge gap, showing them why venture capital matters, and making them active players in India’s startup growth story.

YS: How can the government help bring about a policy framework that would attract capital into the county?

AJ: I think as and when more inputs and conversation happen between government, the private sector, and with the practitioners, we will see a more robust framework. Institutional capital managers have a higher fiduciary responsibility. So it will require a fair amount of robust sort of engagement.

It won't happen over just a casual conference. It needs a lot more engagement between the stakeholders. And they need to see the government’s ability to come together and support this ecosystem, because I think the strides that we've taken in the last few years is because the central government has put its weight behind this ecosystem.

YS: Rukam primarily looks at consumer focused companies. How do you view the changes that are happening within the sector?

AJ: India’s ecommerce growth is directly tied to internet penetration, competitive data rates, and rising per capita income. As connectivity improves and digital payments become second nature—thanks to UPI and growing credit card adoption—online shopping will only accelerate.

Gen Zs will drive this shift as they gain disposable income. Over time, even categories that seem unlikely for ecommerce today will become mainstream. It’s only a matter of when, not if.

YS: There have been several tech IPOs last year. Going forward, how are you looking at the listing of consumer brands?

AJ: Mamaearth’s IPO kicked off this wave of companies going public. This highlights the depth of consumer companies in public markets. Retail investors are able to grasp consumer brands far more easily than tech firms, which still face skepticism— as seen in the recent scrutiny over Zomato and Swiggy’s earnings.

While tech excites investors, there’s lingering doubt about its true value. Consumer companies, on the other hand, are tangible, familiar, and easier to trust. With several consumer brands gearing up for IPOs, 2025 looks strong for both tech and consumer listings.

Even tech-focused investors are pivoting to consumer plays, drawn by clearer exit opportunities—something tech often struggles with.

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YS: How do you think we can put in a financial system that helps close the gender gap in entrepreneurship?

AJ: From an investor’s lens, risk assessment in early-stage startups is rarely financial—that’s a given. The real question is whether a founder can take the company to a successful exit. And here’s where socioeconomics plays a role.

Unlike male founders, women often navigate personal milestones that impact their entrepreneurial journey. This isn’t a judgment—it’s just reality. VCs operate within the business world, but broader societal factors shape founder success.

Take safety, for example. If a woman can’t move freely at night in Delhi, that’s a law and order issue, not a financial problem. Even if safety improves, family and societal norms still influence how freely women can pursue their ambitions.

This extends to investors too. There’s a gender tax—women in leadership still have to factor in security concerns that their male counterparts don’t. No one’s exempt because of their title.

True change starts at multiple levels—law and order, societal expectations, and how privilege is leveraged. Women from privilege have a role in pushing boundaries, while others face structural disadvantages that make the climb even steeper.