The Fundamentum Partnership, founded by Nandan Nilekani and Sanjeev Aggarwal in 2017, has launched Fundamentum Partnership Fund III with a target of ₹2,200 crore ($230 million), including a ₹400 crore greenshoe option.
“Fund III will be the same strategy as the previous funds. We will be lead investors in companies raising their Series B rounds with a $10-15 million cheque,” Prateek Jain, general partner at Fundamentum Partnership, said in an interview with Mint.
Nilekani has anchored the fund as its lead limited partner (LP), making it his largest-ever investment in a venture capital firm.
Jain, who handles the firm's consumer technology vertical, and Mayank Kachhwaha, who oversees fintech investments, have been elevated to general partners to run Fund III. They will handle the new investment vehicle alongside Aggarwal and chief financial officer Sanjay Chaturvedi.
Fundamentum typically makes 4-5 investments in a year. Fund II consisted of a portfolio of 11 companies. Typically, the firm picks up anywhere between a 10-15% equity stake in the startups it invests in as well as a board seat.
White spaces in the thesis
As with its previous funds, the nearly decade-old firm will focus on consumer technology, fintech and artificial intelligence-native enterprise businesses. About 80% of the fund will be invested in the first two sectors, with the third accounting for the balance. Notably, AI a new investment theme for Fundamentum in Fund III.
On the consumer tech front, the firm is bullish on AI initially disrupting content and content generation, hence its investment in IPO-bound Kuku FM from Fund II.
“Every profit pool has the propensity to take up new technologies. When the internet came, content was the first sector to make a business out of it, then commerce, then small and medium businesses. And we'll see that play out with AI as well,” Jain said.
Fundamentum is betting that AI will materially change how people interact and interface with commerce. Its belief is that while the impact on physical products will be less, services provided through edge devices, like smartphones, will be transformational.
On fintech, the firm believes the underlying digital public infrastructure that took a decade to build—from Unified Payments Interface to account aggregator frameworks—has finally reached the maturity needed for AI to meaningfully expand access to financial services, particularly in wealth management and insurance infrastructure, which largely remains unexplored by entrepreneurs.
"Wealth tech is alive, banking infrastructure is alive, credit is alive... I feel fintech is more alive than ever because we're finally able to address the next 400 million users in a meaningful way, after iterating on the first 100 million for over a decade," said Kachhwaha.
On its enterprise AI thesis, the firm is steering clear of horizontal, capital-intensive large language models. Instead, it is betting on narrower, India-specific small language models built around local problems such as land-record data and loan collections—bets it believes need less capital while addressing needs that global model-makers are unlikely to prioritize.
It is also bullish on AI in IT services.
“AI-first business processing outsourcing and AI-first IT services is an industry in the making. Our belief is that given things like forward deployed engineers are becoming a huge thing, India can be the hub for the world,” said Aggarwal.
Returning Fund I
When Fundamentum started out in 2017, the size of its maiden fund was much smaller—just $90 million. Even so, the firm expects outsized returns as the fund nears the end of its lifecycle. Some of its marquee investments from that vintage include used-cars platform Spinny, real-money gaming platform Probo, and digital pharmacy platform Pharmeasy.
The general partners declined to disclose Fund I's internal rate of return, saying that it was "tracking on the right side" as it moves through the distribution cycle. Fund I has a 10-year lifespan with the option to extend it by two years. Chaturvedi said that they've already begun exiting the investments. “We've already returned about 60% of the capital we raised,” he said.
Fundamentum's maiden fund is on track to see the firm pull two large exits from Spinny and Pharmeasy, the former of which, the general partners said, is poised to be a fund returner (a single investment that returns the entire capital raised from LPs).
Fund II, on the other hand, is currently at a gross internal rate of return of 26%.
LP base
The firm has courted both domestic and global investors/limited partners as it plans to close out the third fund’s target corpus within the next few months. While the earlier funds were primarily domestic, with money coming from their own entrepreneur circles and family offices, the goal with Fund III is to bring in foreign entities who want exposure to India.
The fund will run a dual structure, pooling foreign capital either through a GIFT City vehicle or an offshore destination for large institutional investors who are not comfortable investing directly into India, alongside its existing base of domestic entrepreneur and family-office money.
No LPs apart from Nilekani have made commitments yet, though the firm said it has a healthy pipeline and plans to complete its first close within the next six months.