Tata Sons Ltd’s chairman emeritus Ratan Tata is gearing up to get more serious and institutional about the early-stage investing business, after a prolific run as an angel investor.
Tata, 78, in partnership with the University of California, is setting up a venture capital fund with a corpus of around $100-150 million and has already started scouting for start-ups to invest in, said three people aware of the development.
In February, RNT Associates, the privately held investment firm of Ratan Tata, and the chief investment officer’s office of the University of California, announced a partnership to jointly fund start-ups and early-stage enterprises in India over the next 10 years.
“They registered a fund with the markets regulator Securities and Exchange Board of India in June as a category II alternative investment fund, under the name UC-RNT Fund. The vehicle, apart from contributions from RNT Associates and University of California, will also look to raise third-party capital. They are looking at a corpus of $100-150 million for the fund,” said one of the three people cited above, requesting anonymity as he is not authorized to speak to the media.
This is not the first fund that Tata is seeking to set up in a partnership.
In June, Singapore-based venture capital firm Jungle Ventures joined hands with RNT Associates, Accel Partners (India) and Infocomm Investments Pte. Ltd to start SeedPlus, a seed-stage venture capital firm based in the city-state.
Tata, who retired as chairman of Tata Sons in December 2012, has spent almost two years investing his personal wealth directly in technology start-ups both in India and overseas through RNT Associates.
Tata has invested in around 30 start-ups in the last two years, including online market place Snapdeal (Jasper Infotech Pvt. Ltd), online furniture store Urban Ladder (Home Décor Solutions Pvt. Ltd), cab-hailing service Ola (ANI Technologies Pvt. Ltd), online lingerie store Zivame (Actoserba Active Wholesale Pvt. Ltd) and many others across sectors such as healthcare, financial inclusion and e-commerce.
Some of his investments so far in 2016 include online eyewear start-up Lenskart, gaming start-up MadRat Games, artificial intelligence-based chat bot niki.ai, e-ticketing start-up Kyazoonga and San Francisco-based medical emergency response start-up MUrgency Inc.
The Tata-University of California partnership has already started scouting for potential investments, said the second person cited above, also requesting anonymity.
“They have been in the market for a couple of months now. They are looking at investments in the ticket size of around $10-15 million. However, initially they are also looking at writing smaller cheques of around $5 million,” he said.
As an angel investor, Tata’s investment ticket sizes have tended to be between Rs.10 lakh and Rs.1 crore, Mint reported in October 2015 .
“We are looking for interesting opportunities across sectors, be it healthcare or alternate energy, and would be funding some of the best teams and giving them the runway and opportunity,” Jagdeep Singh Bachher, chief investment officer, University of California, said in February.
The fund, which already has a core team in place, is also in the market to hire people, said the third person, requesting anonymity.
“The core team as of now involves Mathias Imbach, who has been associated with RNT Associates for some time now, and has been assisting Tata in his start-up investments. From the University of California side, Tim Recker is looking into the investments of the fund,” he said.
Imbach, who joined RNT Associates in October 2015, is based in Singapore. He was previously with Bain & Co. He served short stints with the Tata group earlier in his career, working as a global intern with Tata Consultancy Services Ltd in 2008 and a research assistant at Tata Management Training Centre in 2007, according to his LinkedIn profile.
Recker, managing director, private equity and real assets at the University of California investment office, has been associated with the university for almost 10 years now.
Mayank Singhal, who previously worked as an associate director at Singapore investment firm Temasek Holdings Pte. Ltd’s Indian unit at its Mumbai office, too has joined the team, the person added.
“They have also hired a reputed international headhunting firm for hiring more talent for the venture,” he said.
Emails sent on Monday to University of California’s Bachher and RNT Associates went unanswered. Calls and text messages sent to Singhal, too, went unanswered.
The establishment of a formal fund by Tata and University of California comes at a time when new fund managers are in the market to raise almost $2 billion worth of capital from investors .
Several of these new funds are betting on the early-stage consumer internet/technology ecosystem in India. These include funds such as Unicorn India Ventures, Pravega Ventures, Stellaris Venture Partners, WaterBridge Ventures, Endiya Partners and Parampara Capital.
The entry of the Tata-University of California fund and other new funds would offer relief to the start-up ecosystem in India that has seen a slowdown in funding this year.
According to data from Venture Intelligence, venture capital investments in the first six months of 2016 were down to $634 million from $958 million in the same period last year.
Fund-raising traction for early-stage funds remains strong, say investors.
“The fund-raising traction for early-stage funds has been stronger than that for traditional growth-stage private equity in the last couple of years. Early-stage funds are increasingly occupying a larger percentage of the overall fundraising,” said Nupur Garg, regional lead, South Asia, at International Finance Corporation (IFC), part of the World Bank group,
IFC is one of the biggest global investors in India, backing roughly two-thirds of the active growth funds investing in unlisted small and mid-cap companies.
Its current portfolio of active funds in India is about $650 million.