SaaS Focused Growth-Stage VC Firm Avataar Venture Launches $350 Mn Fund

SaaS and B2B technology-focused growth-stage venture capitalist (VC) firm Avataar Venture Partners has launched a new fund with a target size of $350 Mn. The firm said in a statement that the fund already had its first close with participation of marquee institutional investors from the US, Europe, and the Middle East. 

The VC firm has also started investing from its new fund and discussions are undergoing with several companies who are raising their early growth rounds, including Series C. 

The fund launch highlights the current growing market opportunity in B2B tech and SaaS sectors which have been resilient despite the funding winter, Avataar Venture said.

Founded in 2019, Avataar Venture has raised two funds prior to this. Its portfolio companies include the likes of media software startup Amagi, which became a unicorn this year, SaaS unicorn for wellness industry Zenoti, retail analytics startups Algonomy, and HRTech startup Sense.

The VC firm operates on a focused fund strategy where it works in trenches with only about a dozen companies per fund.

“Avataar has established its specialist Operational VC model of working closely with founders who want to scale from ~$10 Mn ARR to $100M+ quicker by leveraging the team’s experience of having seen the scaling journey multiple times over,” said Nishant Rao, founding partner of Avataar Venture and former COO of Freshworks.

As per the VC firm, three out of its nine portfolio companies are already past $100 Mn ARR or $1 Bn gross merchandise value (GMV), while another three to four companies are on track to hit the milestone in the next few years.

Avataar Venture also has dedicated US-based operating partners who help its portfolio companies expand globally, develop go-to-market strategies, hire global leadership teams, and more.

In February last year, the VC firm announced raising $100 Mn for its Opportunities Fund to invest in various existing portfolios and new rounds. Post the announcement, Avataar Ventures, along with Ascent Capital, led the $16 Mn funding round of CRMNEXT.

Soon after, Amagi joined the unicorn club in March this year by raising $95 Mn with participation from Avataar Ventures and other investment firms.

As per an EY-CII report, the Indian SaaS market is expected to grow multi-fold by 2025, accounting for almost 7% to 10% of the total global SaaS market. Over the last two years, the Indian SaaS industry has also witnessed the emergence of over 10 unicorns.

In June this year, Bengaluru-based SaaS startup LeadSquared turned unicorn after raising $153 Mn from WestBridge in its Series C funding round.

In the most recent fundraising event in the segment, SaaS startup FitBudd secured $3.4 Mn in its seed funding round earlier this week with participation from the likes of Accel India, Sequoia Capital India, Beenext, among others.

The launch of the new fund comes at a time when the Indian startup ecosystem is reeling under the effects of the funding winter. The funding raised by Indian startups declined 82% YoY to $3 Bn in Q3 2022 from $17.1 Bn in the same period last year. The funding crunch has led to startups resorting to layoffs to increase their runway. As per Inc42’s layoff tracker, Indian startups have laid off 15,216 employees in 2022 so far. 

Besides, many startups have also shut operations this year. On Friday, Inc42 exclusively reported that edtech platform Qin1 shut its operations due to lack of funds.

However, a lot of VC firms, including Sequoia, B Capital, Fundamental VC, Auxano Capital, SphitiCap, and Weave Capital, have launched India-focused funds this year. The VC firms have accumulated dry powder of $16 Bn, which is likely to be invested in startups over the next 12-18 months.