Sparrow Capital closes third fund at Rs 475 crore, means to write bigger cheques

Sparrow Capital has closed its third fund at Rs 475 crore, as it looks to write larger cheques and lead more early-stage rounds at a time when seed funding sizes in India are increasing despite fewer startups getting funded.

The Bengaluru-based firm will invest $1-2 million each in 25-30 startups over the next three years through the new fund; it has already made five commitments.

About 60% of the corpus came from global endowments, foundations, funds of funds, and family offices, and the rest from startup founders, operators, Indian family offices, and high net worth individuals (HNIs). This marks a shift in Sparrow’s LP base, which was largely non-institutional in its earlier vehicles.


The fund is larger than Sparrow’s Rs 120-crore Fund II, through which it backed 27 companies with cheque sizes of $300,000-$500,000. With the larger corpus, Sparrow expects to move from mostly participating and co-leading in rounds to leading or co-leading seed investments.

The firm said institutional investors had been tracking it over a period of time and committed to the new fund after seeing its portfolio and disciplined investment. Sparrow had raised Rs 122 crore in its first close in August 2025, largely from existing LPs and startup ecosystem participants. It reached about Rs 280 crore by April 2026 before completing the final close.

The firm was founded in 2020 by Yash Jain, and counts Aakash Goyal, and Darshit Vora as general partners. Arpit Agrawal has joined the leadership team as CFO and partner for Fund III. He was earlier with KreditBee and PwC.

The fund’s close comes as early-stage investors are allocating more capital to fewer companies. ET reported last week that Indian startups raised $3.34 billion across 608 early-stage and seed rounds in the first half of 2026, compared with $2.96 billion across 1,055 such rounds in the year-ago period. That has nearly doubled the average cheque size, as investors cluster around stronger founders and sectors showing faster traction.

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

The firm will reserve 30-40% of the new fund for follow-on investments, broadly in line with its previous fund, where it had set aside about 35% for follow-ons. Sparrow said companies from its first fund, such as Gokwik, Apnamart, and Deconstruct, are more mature and could provide liquidity opportunities over the next two-three years.

On valuations, Sparrow said pricing remains elevated in select pockets, especially for experienced founders and companies building in hot areas such as AI. However, the broader seed market continues to operate at smaller round sizes and sub-$10 million valuations.

Sparrow has invested in more than 40 companies so far. Its portfolio includes Gokwik, Apnamart, Deconstruct, E6data, Gushwork, Furnishka, Aukera, Strainx, Superhealth, Homerun, and Optimist.