Sidbi's new venture capital fund to back late-stage start-ups

Has made 52 exits from 117 bets across 7 funds

State-run Small Industries Development Bank of India (Sidbi) plans to invest in late and growth-stage start-ups from its eighth fund, a Rs 7-10 billion New Horizons Fund, said a senior official.

Sidbi's earlier funds focused on early-stage bets in start-ups and the micro small & medium enterprises (MSME) space. For instance, it was the first institutional investor in payment gateway BillDesk; it also backed Carzonrent much before Uber and Ola were conceived. 

Sidbi has been managing funds of Rs 4-5 billion (such as its India Opportunities Fund, SME Fund or the Samriddhi Fund). Now, it feels, is a good time to raise a bigger fund and make bigger bets.

The new fund will be sector-agnostic but could go high on consumer-focused themes such as financial or health technology and consumer internet in general. The average investment size will range between Rs 70 lakh and Rs 5 crore. 

Sidbi Venture Capital’s earlier funds have explored a wide variety of themes such as, among others, early-stage technology, SMEs, agriculture, and financial inclusion. The track record is good, with 52 exits from the 117 bets it has made across seven funds. A better strike rate than most venture capital (VC) entities in India.

These include four of its own funds and three small ones it manages for the governments of Maharashtra and West Bengal, and the Union textiles ministry. Two of these have divested one has fully invested and will start making exits. 

“We invested in 117 MSMEs, of which we have made a full exit from 45 companies and partial exit from seven,” Sidbi chairman Mohammad Mustafa told VC Circle earlier this month. “The realised Internal Rate of Return on the fully-exited fund — National Venture Fund For Software and IT Industry — is 12.5 per cent.” 

Returns from its other funds are not available. Put together, Sidbi Venture Capital’s seven funds manage assets worth Rs 2,100 crore. It has exited companies such as BillDesk, Manthan Systems, and MutualFundsIndia.com.

Sidbi also manages a fund of funds under the Startup India initiative, with a corpus of Rs 10,000 crore to back VC funds. Also, a Rs 2,000-crore India Aspiration Fund and a Rs 200-crore Aspire Fund under this portfolio.