Sparrow Capital closes Rs 475 crore Fund III to write bigger seed cheques for startups

Sparrow Capital has closed its third fund at Rs 475 crore, giving the Bengaluru-based venture capital firm more capital to make larger seed-stage investments.

The early-stage, sector-agnostic firm plans to back 25 to 30 startups over the next three years, with initial cheques of $1 million to $2 million. It has already made five investments from the new fund.

About 60% of the corpus came from global investors, including endowments, foundations, funds of funds and family offices. The rest was raised from startup founders, operators, Indian family offices and high net worth individuals.

The investor mix marks a shift for Sparrow, whose earlier funds were backed largely by non-institutional or domestic limited partners.

The new fund is significantly larger than Sparrow’s Rs 120 crore second fund, which backed 27 companies with cheques of $300,000 to $500,000. The larger corpus is expected to allow the firm to lead or co-lead more seed rounds.

Sparrow had raised Rs 122 crore in the first close of the fund in August 2025, before increasing the corpus to about Rs 280 crore by April 2026.

The firm has been investing since 2020. Its website lists Yash Jain, Aakash Goyal and Darshit Vora as general partners, and Arpit Agarwal as chief financial officer.

According to ET, citing data collected from Tracxn’s India Tech H1 2026 report, seed and early-stage startups raised $3.34 billion across 608 rounds in the first half of 2026, compared with $2.96 billion across 1,055 rounds a year earlier.

That pushed the average cheque size across seed and early-stage rounds to about $5.5 million, from $2.8 million a year earlier.

Sparrow will continue to invest across sectors. The firm is seeing stronger founder activity in consumer, fintech and AI-native software companies being built from India for global markets.

It plans to reserve 30% to 40% of the new fund for follow-on investments, broadly in line with its previous fund, where it had set aside about 35% for follow-on rounds.

Sparrow has said valuations remain high in some parts of the seed market, especially for experienced founders and startups building in areas such as AI. However, most seed rounds remain smaller, with many startups valued at less than $10 million.

Companies from Sparrow’s first fund, including GoKwik, Apna Mart and Deconstruct, have matured and could offer liquidity opportunities over the next two to three years.

Sparrow has backed more than 40 companies so far. Its portfolio includes GoKwik, Apna Mart, Deconstruct, E6data, Gushwork, Furnishka, Aukera, StrainX, Superhealth, Homerun and Optimist.