Early stage investor Kae Capital is in talks to raise its third venture capital fund of up to $60 million, said two people aware of the matter, requesting anonymity.
This fund would be slightly bigger than its second fund of $53 million in 2017 as its seed stage cheque sizes have become larger and the fund is seeking more capital to be able to invest across multiple rounds.
Kae Capital was founded by Sasha Mirchandani, one of India’s earliest startup investors, and founder of the Mumbai Angels network of angel investors. It raised a first fund of $25 million, and invested in firms such as online pharmacy 1mg, and omnichannel shopping startup Fynd. From its second fund, its investments include logistics startup Freightwalla and Zetwerk, a business-to-business platform for custom manufacturing.
Kae Capital is working with a Mumbai-based wealth management firm to market the fund and attract limited partners (LPs), investors in a venture capital fund, said the people mentioned above. Its current LPs include Small Industries Development Bank of India, MakeMyTrip founder Deep Kalra, and Infosys co-founder Kris Gopalakrishnan.
Before starting Kae Capital, Mirchandani had invested in his personal capacity in companies such as Myntra, the fashion portal sold to Flipkart in 2014, ad-tech company InMobi, and data analytics firm Fractal Analytics, which has raised $200 million in its last funding round in January this year from private equity firm Apax Partners.
Mint first reported on 21 January that Kae Capital is raising a ₹100 crore add-on fund to further invest in the best portfolio companies of its first fund. Investors generally raise these opportunity funds to go deeper into the best performing portfolio firms.
Mirchandani did not respond to an email seeking comment.
Kae Capital’s exits so far include Fynd, which was acquired by homegrown conglomerate Reliance Industries Ltd earlier this year for $42.3 million, and mobile billing aggregator Boku, which was acquired by billing firm Qubecell in 2013. Other VCs which have raised or are raising add on funds include Blume Ventures, India Quotient, and DSG Consumer Partners.
Kae Capital is a sector agnostic fund and usually invests at the seed stage with follow-on rounds across mobile, e-commerce, consumer internet, education and healthcare sectors. Cheque sizes from its previous funds used to be in the $500,000-800,000 range, while investments from the new fund are expected to start at about a million dollars.
LPs have been increasingly bullish on early stage VCs, with at least half a dozen funds including Endiya Partners, Kalaari Capital, Blume, and India Quotient expected to close fresh funds this year.
Early-stage investments in Indian startups continue to rise in value even as the number of deals have fallen, indicating increased investor appetite to write larger cheques, but for select companies. Between January and June, seed and Series A investments rose 23% to $505 million, from $411 million a year earlier, according to data from Venture Intelligence.