Nvidia bets on Sarvam AI; Sidbi eases fund rules for VCs

Happy Wednesday! Nvidia has joined Sarvam AI's cap table — its first Indian investment. This and more in today's ETtech Morning Dispatch.

Also in the letter:
■ Nykaa triples profit in Q1
■ Meta to meet MeitY officials
■ ETtech Done Deals

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L-R: Rajan Anandan, managing director of Peak XV Partners, and Pratyush Kumar, founder, Sarvam AI.

Sarvam AI cofounder Pratyush Kumar confirmed to us that Nvidia participated as a strategic investor in the startup's $75 million Series B extension, calling the chipmaker's backing 'encouraging' as Sarvam scales its compute infrastructure.

Quote, unquote: "Sarvam is the first Indian company to receive an investment from Nvidia. We've worked extensively on the Nvidia stack over the years. In fact, we've contributed improvements back to Nvidia's own software stack including its training stack. That deep technical relationship has now evolved into a funding relationship, which is a natural next step."

As Sarvam enters its next phase of growth with a full-stack AI platform and applications across coding, cybersecurity, defence, compute, and more, its revenue projections have grown exponentially, Kumar said.

Background: We reported on August 3 about the round where US venture capital firm Glade Brook, private equity investor Gaja Capital and IndiGo Ventures (the venture arm of India's largest airline, IndiGo) also participated.

This is part of a larger $300-310 million funding round, of which Sarvam announced a first close of $234 million in June. That round was led by HCLTech, with participation from Bessemer Venture Partners, Peak XV Partners and Khosla Ventures.

Yes, and: AI venture fund Activate has also backed Sarvam, with sources pegging the investment at $15 million, marking the fund's third growth-stage investment. Haptik cofounder Aakrit Vaish and former Together Fund investor Pratyush Choudhury founded the fund.

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The Small Industries Development Bank of India (Sidbi), which manages the government’s Rs 10,000-crore Fund of Funds for Startups (FFS), has modified its rules, allowing venture capital funds to access government capital faster.

The FFS does not invest directly in startups. Sidbi backs venture funds, which pool its money with capital from other investors.

What has changed:

• Front-loaded support structure: Under the revised framework, eligible funds can draw up to Rs 75 crore from Sidbi within the initial Rs 300 crore of commitments they mobilise, effectively allowing a higher proportion of government participation in the early close of a fund.
• Tapering support: Sidbi’s contribution falls to 20% of the next Rs 200 crore, 15% of the following Rs 250 crore and 10% of the subsequent Rs 250 crore.
• Higher rewards: Managers retain 20% of profits until net annualised returns reach 25%; Sidbi may allow 25% of additional returns thereafter.

Tell me more:

• The move seeks faster investment in AI, semiconductors, deeptech and IP-led innovation, narrowing India’s gap with the US and China.
• Some funds say access could pressure managers when deeptech opportunities remain limited.

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Beauty and fashion retailer Nykaa parent FSN E-Commerce reported strong quarterly profit and revenue, driven by sales growth across its businesses.

Financials:

• Revenue: Up 29% year-on-year (YoY) to Rs 2,782 crore, compared with Rs 2,155 crore a year earlier.
• Net profit: Rose to Rs 80 crore, from Rs 24 crore in the year-ago period.
• Total income: Stood at Rs 2,791.3 crore.
• Expenses: Up 25% YoY to Rs 2,662 crore, compared with Rs 2,120.5 crore a year earlier, driven by higher costs of traded goods purchased, employee benefits and other expenses.
• Gross merchandise value (GMV): Rs 5,590 crore

Growth driver: "A large part of this growth was driven by strong customer acquisition, along with the successful execution of key sales (strategies). In addition, our retail business continued to strengthen, delivering double-digit same-store growth," said Anchit Nayar, CEO, beauty ecommerce at Nykaa, during the analysts’ call.

Aminu acquisition: Nykaa's board approved the acquisition of a 51% stake in Mumbai-based skincare brand Aminu for Rs 32 crore. The company said Aminu, which sells products such as serums and sleep oils, operates "in a sizable high growth segment".

Also Read: Nykaa appoints ex-Instamart COO Ankit Jain to lead quick commerce business

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Arun Srinivas, Meta's Managing Director and Head for India

Meta to meet MeitY officials: Senior Meta executives will meet Ministry of Electronics and Information Technology (MeitY) officials on Wednesday and Thursday to discuss the company’s handling of child sexual abuse material (CSAM), artificial intelligence (AI)-generated content, deepfakes and compliance with Indian laws, said MeitY secretary S Krishnan.

Superleap raises Rs 36 crore: Enterprise AI customer relationship management (CRM) platform Superleap has raised Rs 36 crore in funding from Peak XV Partners' Surge, as the startup looks to expand its enterprise sales footprint.

AI startup Kily secures Rs 30 crore: Agentic enterprise AI startup Kily has raised Rs 30 crore from early-stage investment firm Sorin Investments. The round also saw participation from Razorpay and Wyser Capital. The startup aims to help consumer brands drive growth across e-commerce and quick commerce platforms through its AI agents.

Palo Alto Networks executive on cybersecurity: Palo Alto Networks currently blocks about 31 billion cyber-attacks every 24 hours across its global footprint, Anand Oswal, executive vice president of network security at Palo Alto Networks, told ET. Not all of these are zero-day attacks, but a significant share involve previously unknown threats, he said in an interview.

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■ How data centers broke American politics (Wired)

■ ASML’s hold over the future of chipmaking is weakening (FT)

■ The global grassroots gatherings trying to humanize the AI boom (Rest of World)