MUMBAI: Early-stage consumer-focussed investor DSG Consumer Partners has marked the first close of its $50 million third fund—DSGCP III—at $30 million, said the fund’s founder and managing director Deepak Shahdadpuri in an interview.
DSG had raised its first venture capital fund of $24 million in 2012 and followed it up with a $50 million fund in 2017. It is known for making early bets on hotel chain startup Oyo Rooms, point-of-sale (POS) services provider MSwipe and Raw Pressery cold-pressed juices. The third fund will invest in seed and Series A rounds of $500,000 to $2 million, and will invest a maximum of 15% of the fund in any one company, said Shahdadpuri.
“The strategy will remain identical to Fund II, which was the same for Fund I. When we started in 2013 we developed a hypothesis-led strategy. It has proven to work and we will continue doing what we do well and in the same way. We want to be involved early, at the seed stage and help the founder create the brand narrative—developing the product or service, packaging, pricing, the go-to-market strategy and work closely with the launch," Shahdadpuri said.
The last seven years have confirmed the potential of building large consumer product businesses and the momentum insurgent brands have across categories as they enter white spaces or take on large local or global MNCs, he added.
DSGCP III will focus on seed and Series A investments in consumer brands in India and Southeast Asia and will look to build a portfolio of about 20 companies. The firm’s first and second funds had 21 investments each.
Unlike most venture capital funds which successively raise bigger and bigger sized funds, DSG plans to stick to a fund size of about $50 million on an average,
The third fund will have a hard cap of $60 million. Shahdadpuri expects 85-90% of the capital to come from its existing limited partners (LP, investors in a PE/VC fund), while he expects the remaining to come from new investors such as family offices, Fund of Funds, institutional investors and high networth individuals. “We are an offshore fund and take only foreign capital. Given the size of the fund, we are giving priority to existing investors almost all of whom continue to support us," Shahdadpuri said.
The third fund is expected to hit its final close by June this year.
In addition to the third fund, DSG is also raising its second add on fund- a fund dedicated to backing the best companies from its own portfolio, as they raise Series B rounds and beyond. The firm has previously raised two add-on funds of $10 million and $20 million in 2014 and 2016, respectively, to back MSwipe and Chai Point among others.
Like DSG Consumer Partners, several other early stage investors such as Blume Ventures and Kae Capital too have raised add-on funds recently.
Add-on funds give LPs a chance to invest in more mature startups, with lower risk considering that they will be investing in companies with a proven track record.