The fund, which has already received commitments worth ₹50 crore, aims to invest exclusively in business-to-business technology startups, including software-as-a-service, artificial intelligence, machine learning, and Internet of Things (IoT).
The new fund’s strategy is also in line with its recent crop of investments, all tech-based and aimed at businesses, rather than individuals.
“The acceptance for B2B firms among investors has increased and we see these firms attracting large capital. We see this strategy having worked for us. We understand the space and have seen good follow on rounds in these tech firms, and will continue to back them," said Joshi.
The firm, which was set up by Joshi and Bhaskar Majumdar in 2015, had previously raised a ₹100 crore first fund. This was followed up with a second cross border fund, Unicorn Ascension Fund, in partnership with London-based Ascension Ventures, with an aim to invest £5 million per year.
Unicorn had also planned to raise a ₹600 debt, receiving partial commitments for this, driven by an increasing interest by startups to raise debt. However, given the increased interest from limited partners (LPs), or investors in a VC fund, in equity, it has put the debt fund’s plans on hold for now, Joshi said.
Through the latest fund, the firm plans to invest in about 24 companies with money allocated for follow-on rounds till the Series B stage. A larger fund also allows Unicorn to write larger cheques and gain more meaningful stakes. From its first fund, cheque sizes ranged from ₹50 lakh to ₹4 crore. However from this fund, Unicorn plans to invest between ₹3-5 crore as the first cheque, going up to ₹25-30 crore, including follow on rounds, Joshi said.
Unicorn’s portfolio includes lending startup Smartcoin, cybersecurity firm Sequretek, and Open Financial Technologies, which provides banking services to businesses. Earlier this month, Open raised a $30 million round led by US-based investment firm Tiger Global, which is also one of India’s most prolific startup investors.
Unicorn’s fundraise comes at a time when early-stage investments are rising in value even as the number of deals fall, indicating increased investor appetite to write larger cheques, but only for select companies.
Mint reported on 2 July that for the six months ended 30 June, seed, or very early, and Series A investments collectively climbed 23% to $505 million from $411 million in the same period last year, according to data from Venture Intelligence. The number of deals, however, fell from 177 to 167, marking the fourth straight year of decline in early-stage deal volumes.
The concentrated dealmaking also comes at a time when most of India’s biggest venture capital funds—Sequoia, Accel, Matrix, and Nexus Venture Partners—continue to be focused on the seed stage, as they seek to invest earlier in companies, which gives them the time to grow the business.
Even traditional heavyweight late-stage investors such as South Africa’s Naspers and Chinese internet giant Alibaba, have been looking at more early-stage deals in India.
According to Pranav Pai, founding partner at early-stage firm 3one4 Capital, the rise in early-stage investment funds reflects a global trend.
“We are also seeing a lot more experienced founders- some starting their second or third companies. They tend to attract more investors for larger early rounds," he told Mint earlier this month.