Inventus rides on domestic investors for $50 million India-dedicated fund

Inventus Capital, the early-stage technology-focused venture capital firm, has overshot the target for the first close of its $50-million India-dedicated fund. The fund is set to make a first close at Rs 1.75 billion against a target of Rs 1 billion, said a top executive at the firm. 

The fund plans to raise Rs 3.25 billion, with a greenshoe option of Rs 1.25 billion

This is Inventus’ third fund and the first since its restructuring, where it decided to raise separate, dedicated funds for India and the US. This is also the first time it is raising money from domestic investors. Its first two funds, Inventus-I ($52 million, 2008) and Inventus-II ($106 million, 2012), were raised outside India and deployed both in India and the US. 

Inventus India, which has backed firms like RedBus, and Sokrati, wanted to raise money from local and Asian investors. In 2006-07, when Inventus started, the entrepreneurial eco-system in India was not as mature, and an India dedicated fund would have been hard to support. 

Today, that has changed and so has the availability of domestic capital. ‘’If I was raising a $50 million fund and ten years ago if someone asked me if I could deploy the fund entirely in India, and get exits and returns, I would say I am not sure,’’ says Samir Kumar, managing director, Inventus India. 

‘’But today there are enough opportunities and we have built a strong track record of exits and are confident of successfully investing a $50 million fund in India,’’ he adds. 

The first two funds have earned an internal rate of return (IRR) of 24-26 per cent (in INR) on its Indian investments, which translates into a $IRR of 17-18 per cent for the first fund and 22-23 per cent for the second fund. It has made 18 investments from the first fund, which includes ten in India and 24 investments in the second fund (12 in India).

When it started raising Inventus III - India Fund, it hoped to raise 50 per cent money from local investors and the rest from abroad. Based on current commitments, the ratio is more like 80:20 though it may close the fund with 75 per cent contribution from domestic investors. 

Inventus comes in as a Series-A investor, investing $1 million to $3 million in a $2-million to $5-million round, in firms with some traction and revenues. It always leads the rounds and takes board position. ‘’We have a good track record of exits and returns, have seen no attrition in our team, and are one of few to be around from 2006-2007,’’ says Kumar.

Inventus follows other investors like Lightspeed and Mayfield to raise a India dedicated fund. The restructuring, clarified Kumar, applies only for new funds — Inventus III - India Fund and Inventus III - Silicon Valley Fund. The earlier funds are jointly managed by the Indo-US team. ‘’We have our regular fortnightly calls and take joint decisions on follow-on investments,’’ says Kumar. The restructuring only applies to new funds going forward.