Exfinity Venture plans rupee-dollar fund, may exit some portfolio firms

Rupee denominated fund can only invest up to 25% in a US-based start-up if it has an Indian subsidiary

Exfinity Venture Partners, an early-stage information technology-focused fund, plans to exit some of its portfolio companies this year. And, to perhaps raise a new fund.
 
Promoted by IT veterans T V Mohandas Pai, V Balakrishnan, Deepak Ghaisas and Girish Paranjpe, the Bengaluru-headquartered venture capital fund is also mulling another decision. This is on whether to make its third fund a combination of a rupee and dollar-denominated one, for more flexibility for investing in US-based IT start-ups.
 
“We are working on some exits from the first fund. We started investing in start-ups since mid-2014, and have stayed invested in our portfolio companies for around five years now,” said V Balakrishnan, chairman.
 
Exfinity has raised two funds since 2014. The first one had raised Rs 125 crore and the second fund’s size is Rs 300 crore. “Out of nine companies from our first fund, three have already raised Series-A (funding) and another three Series-B. So, they are doing quite well,” added Balakrishnan.

 
Exfinity is focused on companies dealing in new technology areas and in the business to business (B2B) segment. “We believe B2B has a lot of potential for India and the investment required in this segment is comparatively smaller against that of B2C (business to consumer). We might require around $20-30 million to build a good technology product,” said the chairman. “Also, exits in the B2B space are easier, as there are a lot of large global IT companies which are pursuing acquisition as core strategy.”
 
Entities in new technology areas such as mobility, artificial intelligence (AI), augmented reality, virtual reality and cloud are of interest for the VC fund, for investment across verticals. “As Exfinity is more of an early-stage fund, we come at a pre Series-A level, when the company has got a product ready and is trying to find customers for growth,” Balakrishnan said.
On the plan to raise a third fund, he said they had already invested 50-60 per cent out of the second fund. Once, this is fully invested, Exfinity will look at the next one.
 
“Our first two funds are rupee-denominated. For a third fund, we are mulling to raise a mix of both rupee and dollar denominations, as it will help us in investing in US-based technology start-ups.”
 
A rupee-denominated fund may only invest up to 25 per cent in a US-based start-up, if this has an Indian subsidiary. Such restrictions impede the ability of a rupee fund to invest in companies abroad.
 
Of their portfolio companies, Balakrishnan points to Locus as an example, using AI-based applications for efficient supply chain management. Similarly, Exfinity has invested in California-based agricultural technology start-up AgShift; it uses technology to inspect and grade food produce from farms, using deep learning and computer vision over a mobile device.