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Inventus Capital may raise independent fund to invest in Indian start-ups

LiveMint logoLiveMint 04-06-2017 Sayan Chakraborty

Bengaluru: Venture capital (VC) firm Inventus Capital plans to separate its India and US units and raise an independent fund for investing in Indian start-ups, two people familiar with the matter said.

Inventus’ three executives in India—Parag Dhol, Rutvik Doshi and Samir Kumar—plan to raise a new $60-80 million fund to invest in start-ups here, the people quoted above said on condition of anonymity.

A new name for the fund, which is likely to retain the Inventus brand, will make it clear that it is set up specifically for India, the people said.

Inventus was founded in 2007 by Kanwal Rekhi, Samir Kumar and John Dougery.

The investment firm has offices in Bengaluru and California and has raised two funds totalling $158 million.

Its investment successes include bus ticketing platform RedBus and Insta Health, which were acquired by Naspers and Practo, respectively.

Sierra Atlantic, which was acquired by Hitachi Consulting, is another big exit by Inventus.

After Inventus started raising its third fund late last year, its executives have been exploring the possibility of separate funds for India and the US, the two people said.

Some potential limited partners (LPs) — which invest in VC firms—indicated that they would rather invest in separate funds rather than one common fund for India and the US, the people said. “Start-ups in India and the US have very different revenues and valuations. So, it becomes difficult to invest out of the same fund in the two markets. LPs want to invest separately in India and the US,” one of the people cited above said.

Inventus’ Doshi said in an email that the firm will explore domestic LPs for the new fund, but did not comment on raising an India-focused fund.

“Inventus’ focus on backing consumer and business technology entrepreneurs across India and Silicon Valley will continue. Going forward, we are exploring how to take advantage of the availability of local LP capital,” Doshi said.

The change at Inventus is the latest instance of churn in India’s VC business that has struggled to deliver returns over the past decade because of a shortage of start-up merger and acquisitions (M&As) and public listings.

Mint reported last November that most of India’s VC firms have been forced to seek more time from their investors or LPs to return their money.

Some LPs are becoming increasingly frustrated with the lack of returns which, in turn, is forcing VC firms to change tack. Some investors are also striking out on their own.

Last year, some executives at Helion Venture Partners left to start a new fund called Stellaris Venture Partners.

Another former Helion executive Rahul Chandra is raising a new early-stage fund called Unitary Helion, Mint reported on 28 May.

Two executives at SAIF Partners, Mukul Singhal and Rohit Jain, also left last year to set up their own fund called Pravega Ventures.

The ongoing fund-raising by Inventus is being closely tracked by VCs as an indicator of the investor appetite for Indian start-ups.

Two VCs, Sequoia Capital and Accel Partners, have raised large funds over the past 18 months but these two are considered outliers as their parent firms are wildly successful.

LPs that want to put money into the US arms of Sequoia and Accel are first asked to invest in their global units, a fact that makes it much easier for Sequoia India and Accel India to raise capital. For independent VCs such as Inventus, attracting capital is far more difficult.

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