MUMBAI : Venture capital firm India Quotient, known for being an early backer of startups such as regional language social network ShareChat and digital lender Lendingkart, has closed its third fund of $60 million, a top executive at the firm said.
It is also raising a $40 million opportunities fund to invest in its best performing portfolio companies, taking the total funds it will deploy over the next two years or so to $100 million.
“We received great response from Indian and global family offices. As a seed fund, we have been able to provide many co-investment opportunities to our investors, and this is a win-win. Companies like Loantap, Lendingkart, Sugar, Coolberg and Lokal have been a great draw for co-investments and LPs have participated across multiple rounds,” said Anand Lunia, managing partner at India Quotient. Limited Partners (LP) are the ones who commit money to VC funds.
India Quotient’s existing backers include Gulf-based Indian billionaire B.R. Shetty, Flipkart co-founder Binny Bansal, and Singapore-based family office of Rajesh Bothra—RB Investments. New investors in this fund include a large Chinese fund, prominent Chinese entrepreneurs referred to as super angels, and some large family offices who did not want to be named. Other LPs include MakeMyTrip’s Deep Kalra and Paytm founder Vijay Shekhar Sharma.
India Quotient’s fund sizes have jumped significantly as investors look to become more competitive in an era of abundant capital, and deals become more expensive. It has gone from a $5 million first fund in 2013, to a $16 million second fund in 2015, to the current $60 million third fund, in addition to the $40 million opportunity fund.
While some early-stage investors such as Blume Ventures, India Quotient and Waterbridge Ventures are looking to raise successively larger funds, already large early funds such as Matrix, Nexus and SAIF Partners look to keep the same fund sizes for stability.
“The bar for raising money is getting higher even for good companies. With a $60 million primary fund and the $40 million opportunities fund working in tandem, we will now be able to support our companies much longer in their journey,” Lunia said.
India Quotient is a seed-stage investor—generally the first institutional cheque for a startup. From the primary fund, it plans to make 20 investments, with the first cheque between $250,000 to $1 million for 15-20% ownership.
India Quotient’s largest exit yet is a 25x return on ShareChat, when it sold a portion of its stake to Asian investment firm Hillhouse Capital last year for about ₹50 crore. It also sold its stake in job portal iimjobs.com to InfoEdge, the parent of Naukri.com for ₹81 crore in May this year.
The fund’s strategy will also differ a bit from earlier, when it was primarily seen as focused on consumer internet. It also plans to invest more in business-to-business and enterprise software startups. “Small business in India now needs technology to help with compliance. These businesses are already comfortable with storing data on cloud, making it an emerging opportunity,” Lunia said.
The fundraise also indicates a largely positive environment for startups and investors in India for most of this year, although driven only by a few select investors. Mint reported on 20 October that the economic slowdown in India and global macroeconomic uncertainty seem to have prompted venture capital (VC) investors to take a cautious approach after pumping in record amounts of capital so far this year.
While capital is still flowing into startups, the number of such companies getting funded is little changed, if not falling, indicating investors have become more guarded in their approach. For the few deals that are being closed, venture investors are now taking longer to scrutinize investments.