Early stage investor Kae Capital is raising a ₹100 crore add-on fund to invest in portfolio companies of its first fund, founder and managing director Sasha Mirchandani said.
Kae has fully deployed its first fund of $25 million raised in 2012. Its second fund of $53 million which was raised in 2017 and backed by Small Industries Development Bank of India, MakeMyTrip founder Deep Kalra and Infosys co-founder Kris Gopalakrishnan and others, has exhausted about 70% of the capital.
“We have run out of money to back our Fund 1 companies, and are thus raising this fund. We will selectively invest in the best companies from our portfolio," Mirchandani said in an interview.
“We have seen these entrepreneurs go through ups and downs and bounce back strongly each time and would want to continue supporting them through their journey in building world class companies," he added.
Kae’s second fund has invested in Hiver, a shared inbox management solution, and hard liquor firm Boutique Spirit Brands, among others. Its other investments include wellness products retailer Healthkart, online medicine delivery startup 1mg and Loantap, which lends to salaried employees.
The average ticket size of investments from the add-on fund should be ₹8-10 crore, Mirchandani said. The fund has already made two investments so far. The add-on fund is sponsored by wealth management firm IIFL, which will help Kae market the fund.
Mirchandani expects to close the fundraise by end of the current fiscal year. The fund’s limited partners, or investors, will be mostly high networth individuals who have not invested in Kae’s earlier funds, and a few old investors as well.
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 raised $200 million in its last funding round in earlier this month from private equity firm Apax Partners. Mirchandani is among India’s earliest and prominent venture capital investors, and founded Mumbai Angels, a network of investors in early-stage companies.
Kae is sector-agnostic and makes early-stage bets, usually at the seed stage with follow-on rounds across mobile, e-commerce, consumer internet, education and healthcare sectors. While its earlier cheque sizes used to be about $700,000-800,000, as the startup ecosystem has matured and quality of founders has increased, its average cheque size now is $1 million.
Mint reported on 9 October that seed-stage deal sizes have increased 25% year-on-year to $880,000 in 2018, according to data sourced from Tracxn Technologies.
The trend reflects maturity in the ecosystem, cost increases and increased faith in founders, according to investors.
“The ecosystem is far more mature, with investors recognizing great founders and realizing that great founders also need bigger investments," said Anup Jain, managing partner, Orios Venture Partners, an early-stage investor. “The demand for good quality technology is very high and the supply is not keeping up, leading to higher costs."
Investors have become more cautious after burning their fingers with investments not paying off earlier, thus the fewer number of seed deals, although bigger deal sizes said Sanjay Nath, managing partner at early-stage investor Blume Ventures.