Filter Capital Announces Final Close Of Maiden Fund At $100 Mn

Mumbai-based investment firm Filter Capital has announced the final close of its maiden CAT II AIF growth-stage fund – Filter Capital India Fund I – at INR 800 Cr (close to $100 Mn).

The firm’s founders, Nitin Nayar and Sumit Sinha, started raising funds for the first fund in 2021 and marked its first close in mid-2022 at $40 Mn.

Filter Capital is a technology-focused growth-stage investment firm with a focus on leading/co-leading Series B and C rounds. It aims to invest in 8-10 companies from the first fund. The firm invests in IT services, SaaS, and technology-led businesses across consumer, financial and business services sectors. The average ticket size is INR 60-100 Cr ($7.2 Mn -$12 Mn).

The fund has received capital commitments from a diverse investor base – 60% domestic investors and 40% international investors. Leading Indian institutional investors and family offices such as HDFC Fund of Funds, SIDBI, SRI Fund, Oister Global, DSP family office, Amansa Capital founder Akash Prakash, and Dream11 CEO Harsh Jain are among those who have committed investments.

The fund has invested over 30% of its corpus across four companies – Capillary Technologies, Chalo Mobility, LoadShare Networks, and THB.

Filter Capital’s founders together have decades of experience in the Indian venture capital space. While Nayar worked with Warburg Pincus for more than 14 years in India, Sinha worked with renowned VC and PE firms such as Temasek Holdings, Warburg Pincus, and Multiples Alternate Asset Management in the past.

“In fact, that’s how Sumit and I met each other. We worked at Warburg for about five years between 2010 and 2015. We were looking at almost 300 tech companies together and made some good deals such as in CarTrade, Quikr, and Capillary Technologies,” said Nayar.

Later, when Sinha was leading investments at Multiples, the PE firm invested $23 Mn in Dream 11 and he was on the fantasy gaming unicorn’s board before Multiples exited and it returned the whole fund for Multiples as they got $550 Mn from that deal.

“So, in 2018, when I decided to move out of Warburg Pincus, Sinha was the first person I called,” said Nayar.

Why The Focus On Series B/C Stage Startups

Filter Capital founders believe that Series B/C stage businesses offer the best opportunity as they have enough traction by that stage but are not “discovered by the broader market”.

Besides, with their experience of writing big cheques of $20 Mn-$25 Mn for companies like CarTrade and Quikr in their previous job roles, the founders are confident about investing in Series B/C businesses.

“We both have years of experience in growth stage investing in tech and tech-led companies. We also realised that there is a very interesting risk-reward worth pursuing in the Indian market that makes sense for India but may not make sense for a large-cap PE firm. This has now become the genesis of Filter Capital,” said Nayar.

Sinha said Filter Capital has a unique perspective as, by DNA, it is first and foremost a private equity firm rather than a venture capital investor.

“That keeps us disciplined and gives us the belief that we can get really good returns without playing a binary outcome game or without taking undue risk. That has also kept us focussed on a bunch of themes that we really focus deeply on,” added Sinha.

Strong Focus On Valuation 

Sinha believes that tech investments should offer a good risk-reward balance and this is what Filter Capital is focussed on.

With a concentrated portfolio of 8-10 startups, the investment firm aims to focus on companies which are protected from downsides and do not lead to any capital loss. At the same time, it aims to make investment bets which give confidence that they can give 10X returns if executed well.

“That balance of risk and reward also keeps us very disciplined about what valuation we want to enter at in every deal we do,” Sinha added.

Filter Capital currently has a team of seven people. It is looking to invest 75% of its fund in first cheques while keeping the remaining 25% for follow-on rounds.