Mumbai: Mumbai-based venture firm Nexus India Capital closed its second fund at $220 million (about Rs958.8 crore), more than double its first fund of $100 million, becoming the second Indian fund to raise money after the global market meltdown and in the shadow of growing uncertainty over the ability of the Indian economy to continue to expand by at least 8%.
Profitable investments: (from left) Nexus India Capital’s three-member team of Sandeep Singhal, Naren Gupta and Suvir Sujan. Photograph: Abhijit Bhatlekar / Mint
In both cases, the money came from limited partners, or institutions that back equity funds, in the US. In February, Helion Venture Partners had raised $210 million for its second fund, mostly from the US backers.
“It is a very difficult time to raise money, but there is still a lot of interest in the Indian market, and LPs (limited partners) are looking for strong Indian teams,” said Naren Gupta, managing director, Nexus India Capital.
In the months following the meltdown, VC firms had predicted that it would be easier for established global funds to raise capital, than for first-time domestic ones.
The second innings of funds such as Nexus and Helion, however, indicate a sustained interest in this market unlike in the days following the dot-com bust of 2000-01, when several local funds were forced to shut shop as they could not raise their next funds.
According to Nexus, LPs are taking more active interest in the current round of investing. Its own partners, representing endowments, foundations and financial institutions, travel to India three to four times a year and have met with its portfolio companies. At least half of Nexus India’s 15 limited partners are from the US, while the rest are from Europe and Asia.
“This time around, LPs are more comfortable with India and have a 10-20 year horizon,” said Nexus managing director Sandeep Singhal, who had previously co-founded eVentures, a Rupert Murdoch-backed venture fund that shut shop in 2003.
Last year, Nexus bought out eVentures’ residual portfolio of four companies for an undisclosed amount.
The venture capital firm’s first fund has been deployed across 13 companies, including recent investments in financial services company Unicon Financial Intermediaries Pvt. Ltd and managed infrastructure company Netmagic Solutions Pvt. Ltd.
Unlike peers such as Helion and Matrix Partners India, which have raised larger funds to include growth deals, Nexus plans to continue to invest in sub-$10 million early-stage deals in consumer and business services, media, and clean technology.
However, “our fund now gives us flexibility to invest subsequent rounds in portfolio companies that are doing well and require more capital,” said managing director Suvir Sujan.
In the past, the firm had passed up on such deals as it could not invest large amounts by itself. The firm has now invested seed amounts of a few hundred thousand dollars in five undisclosed start-ups. At present, the fund will be managed by the existing three-member team but it is looking to add partners.