It’s Official, AVF-I is Finally Here!!

  • Author: Anirudh Damani
  • Category:
  • Posted: March 12, 2018

After what seems like a lifetime, I am happy to announce that Artha Venture Fund-I (AVF-I) is officially an Alternative Investment Fund (AIF) after SEBI’s grant of the approval. Our team is ecstatic about receiving this news and we are currently working on the final leg of processes, i.e. signing up Limited Partners (LPs) that have made soft commitments to the fund.

 

AVF-I will invest in pre to early revenue startups, preferably where we are the first investor (in India we would be called the seed investor). We will invest between Rs. 1-1.50 crores in each early-stage investment and participate in the follow-on rounds with larger cheques i.e. 3-4 crores in pre-Series A and 6-9 crores in the Series A round. Therefore, once we invest in a company, they can (provided they perform) expect between Rs. 10-14.50 crores over the course of 3 rounds, from us (an institutional investor). This is a significant USP compared to the other seed funds because we have earmarked a portion of the fund corpus to invest in follow-on rounds.

 

We made this adjustment because we noticed that when the seed fund doesn’t invest in the Series A round, often, these companies are unable to raise ‘the’ round of capital that separates the men from the boys. So, we did some research on developed startup ecosystems and found that the top-performing seed funds wrote significant, if not larger, follow-on cheques for the Series A round. To further strengthen our hypothesis, we analyzed the MCA records of the Indian unicorns (startups with a valuation of $250 million or more) and also conducted research on the Artha India Ventures’ (AIV) portfolio startups that have raised their Series B rounds. This research concluded that it is possible for Series A investors to make as good a return (on an IRR basis) as the seed & pre-series A investors. This in turn also led to an adjustment in AIV’s investment strategy over the past couple of years (we started writing Series A cheques in our portfolio companies) and the results have been very encouraging, to say the least.

 

Even in my informal conversations with partners, associates & analysts of later stage investors I have noticed that there is a common lack of confidence in startups that come from seed investors who cannot or aren’t willing to write the cheque (that is significant enough) for the Series A round. The more investors I spoke to the stronger my conviction was that AVF-I had to make this an important USP i.e. getting the confidence of later stage investors in AVF-I’s recommendations for Series A investments, thereby catalyzing the decision-making process for new investors. Most later stage funds that knew our strategy started actively engaging with us on deals in the pipeline and even sending us deals that were too early for them to invest in. I see this as their endorsement of our strategy and look forward to working with the many family offices and later stage funds that are looking for high-quality deal flow.

Besides our investment strategy, we also bring our founders a large network that spans across the globe. Many of these connections are part of to the business relationships our sponsors have (more on them below) as well as the ecosystem created by AIV’s investment in 56 startups (10 of them domiciled outside India). The close connection we maintain with our network will give our investees a leg up in whatever help/access they require along the way.

I want to thank the people that played a part in taking this idea from a mere concept to a final business model:

  1. Yash Kela who came up with the original idea of starting AVF. He is more like a brother than a partner and it is his vision has become my mission. He introduced me to a slew of fund managers, venture partners and single-handedly recruited the entire Advisory board for AVF-I.
  2. Madhusudan (Kela) uncle for devising our unique fund strategy that ensures that the fund team will only make money if we deliver outsized earnings for the fund and of course the investors. I also want to thank him for his personal mentorship every step of the way and the endless support from his family office. Yash and I promise to take AVF to a level that will make all his efforts worth it and make him proud.
  3. My chacha, Ramesh Damani who immediately endorsed his commitment to the fund idea and got me all the help I needed to remove myself from the daily responsibilities at the companies under the Artha Group of Companies. It is well understood what an early endorsement can do for an entrepreneur’s confidence, and I have him to thank for that initial boost of confidence.
  4. My brother, Animesh, and sister Apurva who joined Artha when I needed them the most and took over Artha Energy and Artha India Ventures, respectively.
  5. Sanjay Gandhi, the legal head of Artha Group. If it wasn’t for his persistent follow-ups with our advisors and the SEBI officers, this approval could have taken twice as long. (He must be the most relieved as he won’t have to avoid me when I ask why the approval is taking this long!)
  6. Vinod Keni and the entire AVF team - Dhiral, Nikunj, and Karishma for continuing to believe as things moved slowly and working on building out the entire referral ecosystem which will power our deal flow going forward.
  7. Sandesha for managing what can only be described as the most grueling job that anyone could ever have i.e. managing my travel & meeting schedule and doing it with an alien-like accuracy.
  8. Last, but not the least my family for being understanding & supporting me throughout the emotional turmoil that a founder of an early stage venture fund goes through.

Going forward, we are in the process of issuing term sheets for 2 very exciting startups and have also made a warehoused investment for a third (will announce it shortly). We expect to achieve our first close in the next 3 months.

Therefore, if you are a startup looking for a well-equipped and experienced investor, reach out to us on prospects@artha.vc.

If you are interested in investing in the fund you can reach out to us on lpprospects@artha.vc

32/2018