We would like to invest in a biz throughout its life cycle: Sandeep Murthy

The larger fund size gives us capacity to work with our entrepreneurs to ensure they can scale their businesses to a significant level, says Saneep Murthy, partner at Lightbox Ventures

Venture Capital firm Lightbox Ventures has raised $178 million (Rs 12.9 billion) for its third fund and hopes to touch $200 million by the end of 2018. Sandeep Murthy, partner at the Mumbai-based entity, shares with Ranju Sarkar in an e-mail interview the fund's strategy and how earlier investments have done. Edited excerpts:

How will your third fund be different from the second one? 

While it is larger, our strategy of doing fewer deals and investing in a business throughout their life cycle will be consistent. We continue to focus on quality over quantity. The larger fund size gives us capacity to work with our entrepreneurs to ensure they can scale their businesses to a significant level. We will continue to invest in consumer-facing businesses that are leveraging technology to build product/service differentiation. We remain excited about opportunities in brands and fast-moving consumer goods, financial services, education and health care.

How have your portfolio companies from the second fund done? 

We have made six investments from our second fund, the most recent one being Flinto. We recently exited Embibe, selling our stake to Reliance in what was till date the largest global investment in AI (artificial intelligence) in education. Beside Embibe, some of the earlier businesses have scaled (up) well, with clearly differentiated business models and sound unit economics. Here's a quick line about each of these:

Droom: India's first and largest transactional marketplace for used cards. Also in two years, it became the country's fifth largest e-commerce company. Toyota's trading arm recently invested in it, with a vision of expanding Droom's platform across the Southeast Asian region.

Faasos: A collection of multiple brands delivered online via a network of 170 local dark kitchens in 10 cities. Behrouz, the biryani-only brand, has in 18 months since launch grown to be among the largest biryani brands in the country, with less than $2MM investment 

Furlenco: The world's first and India's largest furniture subscription company, with 2000 new subscribers every month. Furlenco is now present in seven cities and services more than 30,000 customers every month.

How has your first fund done? Could you give an update on the six companies?

From our first fund, we exited MapMyIndia to Flipkart early in the fund life. We are working with the remaining businesses to generate liquidity and expect to see some sooner rather than later.

One business we are particularly excited about is PayMate, which started off as a B2B (business to business) payments entity. PayMate is currently processing more than $5 billion in annualised transaction processing value and helped generate loans worth $100 million on its platform in June alone. Earlier this year, it signed a partnership with Visa as a payments processing partner. As part of the collaboration, Visa has helped PayMate expand to the Middle East. PayMate is in the process of setting up operations in the UAE and will look to rapidly expand in the region. 

Getting an external investor is considered good for a start-up. As a VC, how far do you go in doing follow-up investments in a start-up?

We typically do not invest in the ‘X-of-India’. This means there are times when external investors could take a little longer to get comfortable with these businesses and business models. Conviction is an essential part of our investment approach. We are happy to support our businesses through these times, as long as the businesses are focused on execution and are delivering on consumer value. On the flip side, we are happy to bring investors who will be able to help create value for the business.