Bengaluru: Nearly eight years after raising its last full-sized fund, venture capital (VC) firm Matrix Partners India has raised a new fund of $300 million with plans to invest it in early-stage startups across emerging sectors and expand its current investment team.
Matrix’s latest fundraise had been widely expected over the past two years, more so after the VC firm chose not to raise a full-sized fund in early 2016 and instead decided to top up its second fund with a $110-million funding boost. In an interview, Matrix Partners founder and managing director Avnish Bajaj said the VC would continue to stay bullish on ventures in the consumer internet space, while being more selective in sectors such as fintech.
“We never target a particular number of investments or deployment. By virtue of deepening of the market, the top of the funnel itself has improved... Our strategy remains to work with the best founders—we want a disproportionate market share of the best founders," said Bajaj, who founded Matrix in 2006 with Rishi Navani.
“We think e-commerce and marketplaces are under-invested and fintech has been over-invested in. E-commerce is in a different avatar now, with tinges of social media and WhatsApp. SaaS and enterprise is taking off," added Bajaj. Before Matrix, Bajaj co-founded Baazee.com with Nexus Venture Partners founder Suvir Sujan, eventually surviving the dot-com bust to engineer the then-biggest sale of an Indian startup to eBay Inc. for $55 million in 2004.
Bajaj indicated Matrix will stay away from “overheated" sectors such as food tech, which has attracted a glut of funding over 12-18 months. In December, leading food delivery service Swiggy raised $1 billion in primary and secondary capital from a clutch of top-tier investors. Fellow managing director Vikram Vaidyanathan said Matrix will make more investments every year with a larger team in near future, so that “we can make more bets as the market deepens".
“(What) has happened is that a lot of people who have helped build out the Flipkarts and Paytms of the world and have worked with these star founders, have learnt best practices from them and have now ventured out to start their own companies, so the quality (of companies) has gone up because the number of experienced founders has gone up," said Tarun Davda, a managing director at Matrix.
Matrix’s first fund in India was set up in August 2006 by Bajaj and Navani with a $150-million corpus, later topped up to $300 million. In 2011, Matrix raised its second fund, which also had a corpus of $300 million. Matrix Partners India is the local franchise of US-based Matrix Partners, which currently has at least $4 billion under management.
Over the past five-six years, Matrix has participated in some of the most sought-after technology deals in the startup ecosystem, including those involving Ola, Practo and Quikr. While some bets from its portfolio have soured, the VC firm still boasts of a formidable line-up. Over the past year, Matrix has backed fast-growing ventures such as DailyNinja, Stanza Living, Vogo and Ziploan.
Matrix faced some uncertain times in 2015-16, when the funding boom in the startup ecosystem was starting to flatten. In April 2016, Navani left to start his own fund. After surviving this rough patch, Bajaj, along with Davda and Vaidyanathan, decided to reposition Matrix’s focus on technology and Internet investments. During that time, Matrix decided against raising a new fund—unlike most of its top-tier peers like Sequoia and Accel—and made do with a top-up of $110 million on its second fund.
VC firms typically raise new funds every three or four years, which is why Matrix’s long hiatus from raising a new fund came as a surprise to many. Over the past 12 months, limited partner (LP) confidence in VC firms has gone up several notches, driven mainly by Flipkart’s mammoth $16-billion exit, which generated hundreds of millions of dollars in returns for top VC firms such as Accel Partners. LP sentiment has also improved due to the rising valuations and performances of other top startups such as Paytm and Ola, as well as due to the rise of a new generation of “unicorn" startups such as Oyo Rooms, Byju’s and Swiggy that are valued at $1 billion or more.
Till date, Matrix has partially or fully exited from at least 30 startups that it has invested in.
Top-tier VC firms such as Sequoia Capital, SAIF Partners and Nexus Venture Partners have all closed new funds over the past 6-7 months. Others such as Kalaari Capital are also expected to raise new funds over the coming months.