Raising funds this year will be tough for VCs: Pavestone Capital

However, the firm is not looking to raise any more for at least 12 months, having just closed Rs 816 cr in fundraising, said Managing Partner Laxmikanth V

Laxmikanth V, managing partner, Pavestone Capital believes that raising funds this year will be an uphill task for venture capitalists (VC) and that it may be delayed due to the current market environment as access to capital is tight. 

 

"I would not call it a challenge, but I think that if you are raising funds now, it is going to be tougher for you to raise funds. Markets are a little tighter on funds. Luckily for us we are not raising funds now, we have just closed our funds," he said. 

 

Pavestone Capital announced the closure of its Technology Fund in November last year with a total of Rs 816 crore raised, surpassing its initial target of Rs 600 crore. 

 

“Primarily the bulk of our capital is domestic, about 90-odd per cent, with about 10 per cent coming from people outside of India,”, said Laxmikanth. Some of the firm’s investors include SRI (Self Reliant India Fund), Mankind Group Family Office, and Core Group, a Belgian entity. 

 

He also added that the firm is not looking to raise another fund until they have deployed 60 per cent of their capital. “I do not see us going to the market at least in the next 12 to 18 months," he said. 

 

With an average ticket size of $5 million to $10 million, and a holding period of five to six years, Pavestone Capital expects to finalise two more deals soon, aiming for a total portfolio of 15 companies. 

 

“We expect to close two more deals by the next month probably. Once we do these two deals, we are almost 50 per cent there (utilisation of funds), maybe next year we will do another four or five. We are not too worried about the deal pipeline because our ticket size is slightly larger, so it helps us spend a lot more time before we decide," he said. 

 

The firm has already deployed 35 per cent of the fund across six investments, with two more in the pipeline. The firm's focus is on enterprise technology and deep tech startups, and early growth stage business-to-business (B2B) technology startups 

 

Notable investments include E42, an AI automation firm, New Space Research and Technologies, which specialises in swarming drone technology for both military and civilian needs, and Bellatrix, a space propulsion startup. The fund sees AI as the dominant investment theme for 2025 but notes a high signal-to-noise ratio in the market. 

 

According to Laxmikanth, AI remains in the ‘hype cycle’ and will take two to three years to show real value. He compared its trajectory to the early days of the internet, which took years to gain mainstream adoption despite emerging in the mid-90s. Business model shifts do not happen overnight, he said, adding that AI will take time to mature before it can drive fundamental changes in how businesses operate. 

 

The fund, founded by industry veterans Lakshmikanth V, Sridhar R, and Srikanth V J T, with an aim to support and scale large-scale systems and companies, allocates 80 per cent to enterprise-tech startups with at least $1 million in annual recurring revenue (ARR) and 20 per cent to “moonshot technologies” in sectors like space tech and robotics.