Bengaluru: Venture capital firm Lightspeed India Partners Advisors Llp has raised a second, bigger fund of $175 million to invest in startups in consumer internet, software and other businesses. US-based Lightspeed, which has been operating in India for 12 years, launched its first dedicated fund for India in 2015. From that $135 million fund, Lightspeed made about 20 investments, including edutech firm Byju’s, messaging app Sharechat, and Udaan, a marketplace for businesses.
From its second fund, Lightspeed India will invest in 25-30 startups, partners Bejul Somaia and Dev Khare said in an interview. It will invest primarily in early-stage startups and strike a few “opportunistic" deals at the Series B and C stages, they said.
“The strategy for the second fund will be very similar to fund one. We will make a proportionately higher number of investments as the fund size is larger. We like making a relatively concentrated set of investments because it allows us to spend more time with our portfolio companies and help them with building leadership teams and company culture, making connections within our network and generally be a sounding board for founders," Khare said.
Lightspeed India raised its second fund from limited partners, companies that invest in venture capital firms, in the US and east Asia.
“LP interest in the second fund is a reflection of an increasingly diverse opportunity set in India. Five years ago, there were mostly consumer e-commerce startups. Now there is a wide array of opportunities including content and media, B2B marketplaces, B2B software, fintech and others. We will continue to invest in all these sectors as well as explore newer areas where the impact of technology will be significant," Somaia said.
Apart from Khare and Somaia, Lightspeed has three other partners: Akshay Bhushan, Harsha Kumar and Vaibhav Agarwal. It’s one of the few funds in the country that has a woman (Kumar) in its senior ranks. In August, the firm will add former Andreessen Horowitz executive Hemant Mohapatra as its sixth partner to bolster its staff for the new fund, Mint reported on 13 May.
Several venture capital firms, including Sequoia Capital, Nexus Venture Partners and Inventus Capital, are expected to raise their next funds this year. Venture capital firms typically raise new funds after 3-4 years; the last fundraising cycle was in 2014-2015. This year, firms like India Quotient and Saama Capital have already raised new funds.
Analysts had predicted that some funds will find it tough to convince limited partners to continue backing them because Indian venture capital firms have struggled to return capital. But exits have picked up, primarily on the back of secondary share sales, where new investors buy shares from existing investors in companies. Japan’s SoftBank Group Corp. and some specialist secondary funds, such as TR Capital, have been aggressively buying shares through secondary transactions in start-ups like Paytm, Lenskart and others. Besides, Walmart’s $16 billion acquisition of Flipkart in May has, to some extent, allayed concerns that the Indian startup ecosystem doesn’t deliver sufficient exits.
“There are opportunities for all funds now to take exits via the secondary route, especially in market leading companies. But we will only take these very selectively. We believe that you need to stick around for companies to become really big and that’s when you’ll get the big exits through IPOs and M&As, such as last year’s IPO of our portfolio company Indian Energy Exchange. And our first India-dedicated fund is only three years old so there’s not a lot of pressure from a fund cycle point of view to sell immediately," Khare said.