American hedge fund Steadview Capital plans to invest $500 million in growth-stage companies in India over the next two years, two people aware of its strategy said.
The fund is looking to invest $20-40 million per deal, the people said on condition of anonymity.
The hedge fund, which has previously invested in unicorns, such as Flipkart and Ola, is looking at consumer internet startups in vertical e-commerce, content and fintech.
“Steadview could invest up to $100 million in a single firm if the company’s financial metrics justify heavy capital," the first person cited above said.
The hedge fund went slow on India investments between 2015 and 2018, and exited Flipkart in 2018 in the latter’s sale to Walmart Inc.
Since then, Steadview has made six new investments totaling about $200 million, besides investing $74 million more in Ola Cabs.
This year, Steadview has bet on business-to-business fresh supply chain startup Ninjacart, online education startup Unacademy and online fantasy gaming platform Dream11, where its investment catapulted the startup to unicorn status.
Last year, it invested in eyewear retail startup Lenskart, home services firm UrbanClap, and INDWealth, a wealth management platform started by former Ibibo founder Ashish Kashyap.
It has also been one of the few investors actively entering companies by buying secondary stakes of existing investors, which is how it invested in Lenskart last year, and in fantasy gaming platform Dream11 in April this year.
Steadview was among a handful of hedge fund investors that invested heavily in Indian startups between 2014 and 2015, when India’s first unicorns were being created.
Hedge fund contemporaries that invested during that period include Falcon Edge, Valiant Capital and Tybourne Capital.
Steadview first invested in India in July 2014, joining a $21 million round in online furniture retailer Urban Ladder.
Since then until November 2015, it participated in 12 rounds in half a dozen firms, including Flipkart, Ola, online insurance marketplace Policybazaar, music streaming platform Saavn and online classifieds marketplace Quikr, among others, according to data from Tracxn Technologies.
Steadview did not make any fresh investments beginning November 2015 till August 2018, when it backed Lenskart. During the period, it barely invested even in its existing portfolio’s follow-on rounds, backing only Urban Ladder.
Back in action now, Steadview has earmarked a significant amount of capital for Indian startups. Its investments here are currently overseen by Ravi Mehta, Steadview India’s Hong Kong-based managing director since 2009.
“With its plans to increase focus on India, Steadview is also planning to increase its headcount here and is looking to hire one more person in India," the first person added.
Mehta did not respond to an email seeking comment.
Mint reported on 7 July that growth-stage investments in Indian startups set a record by breaching the billion-dollar mark in the first half of this year, as new investors doubled down on Series B and C rounds, generally considered the growth stage for startups.
“Hedge funds seem to have returned to active investing because they have had a good experience and their portfolio companies have grown well," said Anand Lunia, Partner at India Quotient, an early stage investor. “We are witnessing a doubling down, fuelling the market grab strategy by leading startups."