SUMMARY
The first half of the fund has been backed by family offices including Salgaocars and Kothari and some early institutional investors from India and Japan
The fund will have a green shoe option of about $15-$20 Mn and is likely to close by March 2023
It will invest between $1 Mn and $2 Mn in 15-20 seed-stage and growth-stage startups working in fintech and commerce industry in the coming three and a half years
Venture capital firm 8i Ventures has raised $25 Mn, marking the first closure of its $50 Mn second fund. The fund will have a green shoe option of about $15-$20 Mn and is likely to close by March 2023.
The first half of the fund has been backed by family offices including Salgaocars and Kothari and some early institutional investors from India and Japan.
Set up in 2019 by Vishwanath and Vikram Chachra, 8i Ventures’ second fund has an overall lifecycle of nine years. So far, the venture capital firm has backed over 50 early-stage startups including Slice, Carwale.com, HCG Global, EzeTap, Blue Tokai, MoneyTap and Signzy, among others.
“Talking about the second half of the fund, 8i Ventures will only be focusing on institutional investors. The company has returned 27% of the capital (raised in the first fund) back to our limited partners (LPs),” Vishwanath V, general partners at 8i Ventures told Inc42.
The fund will invest between $1 Mn and $2 Mn in 15-20 seed-stage and growth-stage startups working in the fintech and commerce industry in the coming three and a half years. Further, the fund will have a deal size of around five investments every year. It is currently in advance talks to invest in two-three startups.
Speaking about investments in pre-revenue startups, Vishwanath said that the second fund might invest up to $500K in super early-stage startups (pre-revenue startups). He further added, “As seed investors, we have the confidence to underwrite teams which we think have the potential for good revenue. So we will invest across both revenue and pre-revenue startups.”
Earlier this year, 8i Ventures’ portfolio startup M2P secured funding from Tiger Global and Insight Partners at a valuation of $600 Mn. As part of the deal, 8i Ventures made a partial exit with over 36x return from the fintech startup in April this year, the VC firm informed.
The fund has been introduced at a time when Indian startups are seeing market volatility, low investors’ sentiments, global disruption and facing various other challenges owing to geo-political tensions. At the moment, individual, institutional and angel investors are reluctant to make investment bets in emerging startups.
On the flip side, venture capitalists are making utmost use of the current market situation and are subsequently backing early-stage and growth-stage startups. Some of the VC funds that are infusing money in homegrown startups are Anicut Capital’s INR 500 Cr fund and Jashvik Capital’s $350 Mn fund.
VC Exits And Startup IPOs
Vikram believes that a startup ideally takes about seven years to find its footing and become successful. “I think startups accelerate in the first four to seven years, while some companies grow faster and others scale gradually,” he added.
Speaking about VC exits, he said that VCs have to design their portfolios in such a way that they can start looking for exits in four to seven years (of startup investments).
At present, new-age startups such as Nykaa, Paytm, Zomato and PolicyBazaar, among others are severely battered in the Indian bourses. Seeing this, many unicorns and late-stage startups have stalled their IPO plans and are waiting for the stock market to turn favourable for public listings.
Addressing the subject, Vikram explained that startups with $50 Mn EBITDA, gross margins of up to 50-60% and a strong business model can easily get $1 Bn valuation. Currently, bourses are focusing on revenue growth, increasing gross margins, and low churn of customers. If startups meet all these matrices then they should go for an IPO.
He concluded by saying that there are about four portfolio companies at 8iVentures that are planning to go for IPO listing in some time.
