Homegrown startup investor Blume Ventures has closed its opportunity fund at $41 million, designed to invest in best performing portfolio companies, a senior executive said.
“This is one of the largest domestic opportunity funds among Indian venture capital funds, of which we have already deployed 80%. This was an ideal opportunity for Blume to partner with these onshore capital providers as well as high-quality foreign institutions given the attractiveness of both a shorter life fund and a very selective set of emerging winners in the portfolio," said Karthik Reddy, managing partner at Blume Ventures.
Early-stage VC firms managing their second or third fund are looking to double down on successful portfolio companies, and allow their limited partners (LPs), or investors, to go deeper in mature start-ups—thus raising funds dedicated to select portfolio companies.
“So, a good problem is brewing—we have belief in a lot of these companies growing 5X from here and we think another batch of 10 companies is coming, but of course, we have no additional capital left—so, we’d have to pass up our pro ratas (investing to prevent stake dilution) or find innovative means to keep exercising our option (retaining stake)," Reddy said.
From this fund, Blume has invested in the Series B to D rounds of online education firm Unacademy, robotics firm Grey Orange, gadget repair startup Servify, insurance firm Turtlemint, delivery firm Dunzo, cosmetics firm Purplle, travel firm IntrCity (Railyatri), milk delivery startup Milkbasket, healthcare firm Tricog and smartphone reseller Cashify.
Blume closed the fund along with its third fund of $102 million, from which it will invest in early-stage technology-led startups. A larger third fund, compared to its first $20 million and second $60 million fund, as well as the add-on fund helps the VC firm stay competitive and avoid dilution of its shareholding in its best companies where valuations inch towards the billion-dollar mark, in an environment where investors say they are seeing better quality entrepreneurs than ever before.
“For a small fund, it’s imperative to get into founders and ideas which can become incredibly large but are yet not mainstream. Blume gets paid to be ahead of the curve than larger (Series) A players doing seed programmes, not to be behind them or riding the same wave," he said.
“We can’t win with $1-2 million of capital—so, we have to have as deep a conviction of the space as the founders pitching radically new ideas and having capacity to build teams to execute for that scale," Reddy added.
Over the last 12-18 months, more domestic VCs have increasingly resorted to add-on funds for the same reason.
India Quotient, Kae Capital, 3one4 Capital and DSG Consumer Partners have all raised add-on funds worth a combined ₹500 crore.
Mint reported on 19 February that VC fund Iron Pillar is also in talks to raise a $30 million add-on fund to invest in existing portfolio companies such as online meat and fish grocer FreshToHome and phone service management firm Servify.