Early-stage venture capital (VC) firm Blume Ventures is all set to launch its third fund for which it is planning to raise $80-100 million by the first quarter of 2018, managing partner Karthik Reddy said.
Blume Ventures was founded in 2010 by Reddy and Sanjay Nath. It raised Rs100 crore, or around $20 million at the time, for its debut fund in 2011. It has so far funded about 75 companies, including test preparation start-up MockBank, background verification firm IDfy, robotics firm GreyOrange, online learning platform Unacademy, travel app RailYatri, among others.
“In the second fund, we went to $60 million from $20 million in our first fund. We want to be called the best institution to provide pre-series A and Series A funding and want to raise close to $100 million for our third fund. We don’t want to be a classic Series A fund, but we want entrepreneurs to come to us for initial capital after the family rounds and before they go to other institutional players,” said Reddy.
The firm plans to start marketing by the end of this year and commence fund-raising early next year, said Nath.
The third fund will see Blume expand its limited partner (LP) base, with the firm targeting to raise the fund from at least 50% new LPs. Investors in a private equity or venture capital fund are called limited partners.
“We are hoping to have a brand new LP base, which would constitute 50-to-60% of the new fund. The other 30-to-40% will come from our existing investors,” said Reddy. In the earlier two funds, Blume had a mix of domestic as well as overseas investors.
In 2016, the firm had marked the final close of its second fund at $60 million (about Rs400 crore). Out of the total, $40 million came from overseas investors, with about $20-to-22 million coming from American investors, including ICONIQ Capital, the San Francisco-based investment adviser which helps manage the fortunes of Silicon Valley billionaires such as Facebook Inc. co-founder and chief executive Mark Zuckerberg, Mint reported.
From a sector perspective, the third fund, while continuing to bet on some of the existing themes, will also see Blume focus on sectors such as health.
“One of the focus areas of the fund will be the health sector, which would comprise opportunities such as health tech, health food, health information space, etc. In addition, consumer problems like traffic congestion, power, small businesses, media, and education will also be our focus,” Reddy added.
While its first two funds are yet to mature from an exit point of view, the firm has seen a few exits from its portfolio. It was among the investors that exited during Bengaluru-based mobile marketing and analytics company ZipDial Mobile Solutions Pvt. Ltd’s acquisition by Twitter Inc. in 2015. The same year, another Blume portfolio company TaxiForSure was acquired by Ola in a cash and stock deal.
According to Reddy, Blume’s portfolio currently is sitting on unrealized gains of 2x invested capital. The firm, however, plans to return at least 4x what it raised from LPs.
“So far we are at two times, but the goal is to deliver four times. We still have lot of good companies like Instamojo, Zopper and Exotel from our first fund that are yet to break out; and when it does happen, we will hopefully meet our goal,” said Reddy.