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3one4 Capital Closes Growth, Seed Funds With Eye On Changing Funding Landscape

3one4 Capital Closes Growth, Seed Funds With Eye On Changing Funding Landscape

Continuum I closed at INR 400 Cr and will invest in follow-on rounds in the portfolio

Rising I closed at INR 45 Cr to be used for a mix of new and existing investments

3one4's Pranav Pai said its investors have seen the value their portfolio brings

Bengaluru-based 3one4 Capital has announced the final close of its Continuum I and Rising I fund at INR 400 Cr and INR 45 Cr. While Continuum I, which was launched in early 2019, will focus on Series B and above round in existing portfolio companies, Rising I will enter into deals with idea stage and seed-stage companies which includes new and follow-on investments.

3one4 said Continuum I would have cheque sizes between $3 Mn and $5 Mn. Meanwhile, with cheque sizes between INR 50 Lakh ($71K) to INR 3.5 Cr ($490K), Rising I, 3One 4 Capital said, is prepared to invest in a range of seed and early-stage rounds.

Speaking to Inc42, Pranav Pai, managing partner of 3one4 Capital, said that Rising I will be invested in 50% of its portfolio of early-stage startups and 50% in new startups looking for seed funding.

On the other hand, Continuum I fund will focus on investing in follow-on rounds in the promising startups from 3one4 Capital’s portfolio.

Continuum I had targeted INR 350 Cr and announced its first close in Feb 2019 for INR 150 Cr. On the other hand, Rising I, launched which was launched last, had targeted INR 25 Cr. This clearly highlights that both the funds currently stands oversubscribed.

When asked whether this was a vindication of 3one4 Capital’s thesis and approach towards investments, Pai said that what matters the most is the track record. “Rather than a vindication, this is a sign that our investors have started to believe in us,” he told Inc42.

3one4 Capital’s portfolio spans tech enterprise, media and content, fintech, direct-to-consumer, deeptech, among other sectors. So far, the VC has invested in nine startups from Rising I fund and in five startups from Continuum I fund.

Moreover, Continuum I has brought several new LPs such as Emory Investment Management, a large US endowment that manages the assets of Emory University, Emory Healthcare, and The Carter Center, Sojitz – a leading Japanese corporation, with several of the large LPs in earlier funds continuing their support.

Additionally, Rising I’s investors include existing supporters of 3one4 Capital’s earlier funds as well as new family offices who have been working with the firm as coinvestors in the seed stage.

Not Just A VC, But Growth Vehicle

Besides investments, startups, especially during their early stage, require the right type of support system to stand right next to them, Paid told us. And 3one4 Capital’s both Continuum I and Rising I fund acknowledges this fact and provides the support not just in the form of capital but mentorship, partnership development, among others.

According to Pai, it’s about four key elements — the right mentorship, partnership development with Indian and global banks and corporations, strategy for the next round of fundraising, and helping startups adapt to policy and regulations.

3one4 Capital’s strategy to provide startups with the overall support ecosystem has worked well for its portfolio startups, at least Pai believes so. According to him, since the launch of the VC company’s first fund in 2016, 65% of its startups have raised their new funds within the next two years.

Moreover, Pai claims that 3one4 Capital helps its portfolio startups to achieve $1 Mn annual recurring revenue targets within 18 months of the association.

3one4 Capital claims to be managing a combined corpus of INR 800 Cr and a portfolio of over 50 investments across early-stage startups. 3one4 Capital’s investments include Licious, Open, Betterplace, DarwinBox, Faircent, Bugworks, Pocket Aces, and Tracxn.

Shift In Seed Funding Landscape

At a time when startups such as Citrus Pay cofounder Jitendra Gupta’s Amica, FreeCharge founder Kunal Shah’s Cred are getting big cheques in seed rounds — $24 Mn and $30 Mn respectively — Pai said there has been a shift in the landscape of early investments.

Pai says that the entire ecosystem is witnessing availability of very high variants in seed-funding of startups. “Seed-funding in the range of INR 50 Lakh ($71K) to INR 1 Cr ($490K) is possible as an early-stage seed investor, however, when these funding rounds starts to reach close to $20 Mn, it becomes really difficult to take a decision on whether to invest in them or not,” he said.

He added that startups are realising that some business models need big funds at the beginning and each has its own reasoning behind this need.

So while the expectations and dynamics of seed-stage funding are changing, 3One4 wants to be in a position where it does not miss out on the opportunity. While most of the early-stage startup funds would consider this high risk, Pai highlighted that VCs must adapt to shifting patterns. and should remain open to high variants with calculated risks.

Like Pai added, “Whether it’s raising 1 or 300 crores, our job does not change. Our job is to find good companies and help them grow faster and obviously generate returns. That’s the challenge.”