Early-stage venture capital firm Ventureast, which achieved the first close of about $85 million for its sixth fund, Ventureast Proactive Fund II (VPF2), is looking to close the fund by middle of 2017. The investment firm is looking to raise around $150 million in this fund.
Ventureast, which has been an active for the last two decades, plans to invest in at least two dozen firms from this fund, having made four investments already, Siddhartha Das, General Partner, Ventureast told DEALSTREETASIA in an interview.
The India and Mauritius-domiciled fund, which manages over $400 million, has made over 100 investments in technology, healthcare and clean environment. Its investments include pharmaceuticals firm Gland Pharma; semiconductor product company Moschip; and organic food products retailer Sresta’s 24 Mantra. Edited Excerpts
What is the status of your latest fund? How many investments have you done from this fund?
We have done our first closing and we are investing from the first closing then we will do our final close this year. I can’t give an exact time frame for the closure, but we are aiming at mid-year for the final closing. We have done four investments from this fund so far.
What is the deployment strategy for this latest fund?
Our strategy is to focus on certain emerging sectors. We see smart phone penetration as kind of a given, so one is obviously leveraging on the mobile infrastructure and smart phone penetration to provide solutions for that market, it would also have an emphasis on semi-urban. We also have a view that analytics will play a big role in future businesses, primarily because today a lot of the businesses require that the insight analysis to stay competitive. We are talking about the BFSI sector, insurance products, banking products, micro-lending. All of that requires heavy dose of analytics and understanding and profiling the customer.
Also, if you see retail e-commerce need huge help, it’s about survival of the fittest. Basically anyone who can get better insight on the customer in terms of the profile. The other area which is also probably falls more in the private domain is security and surveillance and more and more analytics and AI and technologies that support visualisation.
You have invested in non-tech companies in the past, is that something that you might want to increase in this fund?
I think it’s going to be a bit of a tech-enabled focus. Technology has permeated through industries. Earlier technology was bucketed in IT and IT-enabled services, but technology today permeates across multiple sectors. If you take logistics for example clearly have tech kind of foundations like the apps and the optimisation of routing algorithms and so on, if you look at transportation again with the apps being developed to optimise aggregation and demand. In that sense it is going to be tech-focused where tech will be a foundation.
You had also recently launched a $4 million healthcare fund? What was the requirement of a separate fund?
It’s not really a fund, we wouldn’t raise such a small fund. It’s really more of an allocation that is not limited to digital health and cuts across many emerging sectors, what we might call “Moonshot ideas” where we put in a small amount of capital to mitigate the risks, because these are ideas that can lead to terrific outcomes but initial bet will be a small bet.
Earlier Ventureast also had a separate seed-stage fund, which got merged into the current. Is that the kind of model for this particular allocation?
In a sense that’s true. We had a Ventureast Tenet Fund where we were one of the LPs along with Google and some others. The idea today is to sustain that in one fund, because if you look at the investing behaviour of most funds today, they invest in sectors across the spectrum from very stage to larger rounds.
Would you also want to invest in later stages?
We would still continue to focus on Series A, which is our sweet spot, and then we would take some bets on seed stage. This are stages that have been vacated by many funds that have moved up in terms of ticket sizes. So there are not many funds in the $50-100 million range, so we’re comfortable in that spot. There will, of course, be some allocation for follow on, but we will not be a classical Series B investor, but will rather be a Series A investor.
Would you want to have separate sector-specific funds?
Right now we have two separate fund management teams, one is based out of Hyderabad which focuses on life-oriented sectors which would typically be agri, clean tech, life sciences and so on. Then the tech fund is more technology oriented in the Information Technology sense, and some level of electronics and IoT.
Would you be interested in overseas investments?
We can, because a lot of companies what we know as Indian companies have their legal entities which is based outside of India. To that extent that is a possibility that can happen. Clearly we want to leverage the India market as well as the Indian talent pool, to that extent those companies would have to be India in a sense. We are an India-focussed fund.
How do you the next one year or so from an investors point of view?
Right now, I would say, things are a little slow in the overall market. There are many funds with large portfolios and they are focused on portfolio management activities, which is why when you see the data on the first quarter of the calendar year there are been some drop. After every wave of investing, there is a churn in what’s in flavour and what’s not. So there is a lull in activity since most of the funds are trying to figure out what’s the next wave. Many funds are also in the fund raising cycle right now.
From Ventureast what does the near future look like? What kind of investment activity can we expect?
There is going to be a focus on semi-urban markets, in terms of leveraging on the smart phone revolution. We might see more of analytics right from data convergence to data warehousing, to predictive analytics, which would simplify a lot of business processes that are more manual at this point. A third area would financial services companies, SME lending, micro credit, in areas where analytics might play a big role in terms of risk assessment and so on. A fourth area would be whether in the overall vertical e-commerce model where the verticals are showing growth momentum, not purely in terms of growth for the sake of growth but where there are clear signs that they are going to evolve into high margin businesses. Also we have a focus on industrial IoT and electronics, given the challenges in that sector, innovation is something that we are looking very hard in that sector whether its commercial IoT or industrial IoT.
How many companies are you planning to invest this year?
Maybe we’ll do about two dozen investments from this fund, how many we do in a year that’s not predictable. We have already done four in the last five months but that’s not a prediction for the future.