‘Capital efficiency, entrepreneur first will remain key tenets’
Early-stage venture capital firm Inventus Capital, which backed bus booking site redBus, has made the first close of its third fund at ~2 billion. Managing Director PARAG DHOL tells Ranju Sarkar how many entrepreneurs whom it had backed earlier are investing in the fund.
How will the third fund be different from the first two funds in terms of ticket size and focus?
We will invest in India centric companies. There’s no change in focus (why fix something that is not broken?). We will continue to invest in Series-A opportunities in Internet, mobile, software, IoT machine learning applications and fintech segments.
Initial cheque sizes would be ~50150 million, and we will invest ~250300 million in a company over multiple rounds. Capital efficiency and entrepreneur first will remain key tenets.
You may raise 80 per cent of the fund from domestic investors. What explains the overwhelming response?
We attribute that to our track record. Though we say so, thoughtful, evenly-paced investing (across years/ segments/cycles) makes the difference.
Can you share your track record?
In Fund I, we have already harvested ~2 billion from three profitable exits, on a total investment of ~1.24 billion. We expect the remaining five companies in Fund I (when combined with the prior exits) to lead to a healthy fund multiple. We have not had any exit in Fund II yet but well performing companies like PolicyBazaar, Unbxd and MoveInsync make the current IRRs (internal rate of returns) /multiples very promising.
Which tech entrepreneurs have invested in the fund? Any reason why you managed to attract so many of them?
They are the ones whom we have backed in the past (at Inventus/earlier) — Phanindra Sama (redBus), Ramesh Emani (Insta Health), Manu Parpia (Geometric Software), Naresh Ponnapa (Indecomm), Krishnakumar Natarajan and NS Partha (Mindtree); Deep Kalra (MakeMyTrip); three of the BigBasket founders; one BookMyShow founder; K Ganesh & Srini (GrowthStory). Credibility (from prior operational/VC days) and track record are the key reasons. Most of the above-mentioned names (and most other investors in our fund) are people who are in our first/second degree of separation. That is, they are people we have worked with, worked for or have invested in/alongside.
Besides SIDBI, are there any other local LPs who have backed the fund?
There are three family offices that have signed on, as well. As far as we know, at least two (out of the three) have invested in other funds.
How have your first two funds done in terms of returns and exits?
Bench-marking of VC returns is still not transparent. Yet we understand (from people in the know) that we are likely top decile.
Why did you choose to float separate funds for India and the US?
Availability of domestic capital — fund managed by SIDBI being one. LPs, both domestic and international, get a more focused offering.