Utsav Somani-led Galaxy Fund wants to teach Indian founders the art of early-stage investment

The Galaxy Fund has raised $45 million and will allocate $1 million each to select founders to invest in pre-seed and seed-stage breakout technology startups.

Utsav Somani-led Galaxy Fund wants to teach Indian founders the art of early-stage investment

Wednesday February 23, 2022,

4 min Read

Early-stage investor and AngelList India CEO Utsav Somani announced the launch of Galaxy Fund of $45 million, which will provide select startup founders $1 million to invest in technology startups. 

Galaxy’s mentor and limited partners include Naval Ravikant of AngelList, Elad Gil of Color Genomics, Lachy Groom of Stripe, Jonathan Swanson of Thumbtack, Jeff Fagnan of Accomplice, entrepreneur Tim Ferriss, and Jake Zeller of Spearhead. Utsav will be the founding partner of Galaxy.

The Galaxy Fund model is similar to the one run by Spearhead in the US, founded by Naval Ravikant and Jeff Fagnan in 2017. At present, Spearhead is on its fourth fund of $100 million. While Spearhead shared its knowledge on running the programme, Utsav says there is no formal partnership between the two.

“We are independent of AngelList India and AngelList in the US, though it offers its services to Galaxy through the technology platform and legal support. Galaxy is aimed at startup founders who are busy building their own companies, and can identify these startups and write the first cheque for a founder building great technology,” Utsav told YourStory

Founders investing in startups is not a new phenomenon with startup founders like Kunal Shah of Cred and Ramakant Sharma of Livspace investing in early-stage companies. Recently PayU’s Amrish Rau and founder of neobank Jupiter, Jitendra Gupta, announced a $40 million fund in January 2022 to invest in fintech companies. In July 2021, Freshworks CEO Girish Mathrubootham announced Together Fund with a focus on SaaS startups.

However, Galaxy is different from these founder-led funds as it allocates capital to startup founders to invest, besides mentoring them on angel investing. The programme will have multiple cohorts a year, and the application deadline for the first cohort is March 15. Galaxy Fund will select 10-15 founders over two cohorts.

There is no timeline for the founders to spend the $1 million allocation. The founders will be required to own one to three percent of the company. The name of the investment vehicle can be selected by the founder. 

“We are very different from scout programmes run by venture capital funds as the scout has to send an investment memo to the fund, which takes time to close. Further, these scouts do not get to be on the captable of the startup identified by them. We will be advising the selected founders on their first few investments but there is no pressure to invest,” said Utsav. 

The allocation of the $1 million funds will be made in two tranches of $500,000 each, depending on the founder adhering to the terms of investment specified by Galaxy. For founders making exceptional investments, an additional $2 million will be provided by Galaxy, besides the provision for follow-on funding for the startups selected by the founders.

“We are looking for venture style returns, and we want founders to take the moonshot. It is always great for companies to have another founder on their captable, and this is a learning process for the founder as well on how to hire an engineering team, scale the company,” said Utsav. 

The investments will be made mainly in pre-seed and seed-stage companies, with a potential for 100X to 1000X returns. Galaxy also advises founders to avoid investing in consumer goods, ecommerce, gaming, lifestyle, niche markets, media, and retail companies, unless there is remarkable technology leverage. Also, founders who are a part of Galaxy cannot co-invest in companies.

From conception to raising the capital, Galaxy has been in the works for nearly seven months, said Utsav. The Delaware-headquartered fund has also reached out to nearly 150 founders to create a buzz around the launch.

Edited by Suman Singh