Fundamentum Partnership, a venture firm co-founded by Nandan Nilekani and Sanjeev Aggarwal, has raised $227 million for its second fund as the high-profile tech industry veterans commit to supporting startups in the South Asian nation .
The fund plans to deploy the capital by investing in four to five startups annually. Fundamentum, which typically supports startups in the Series B phase and beyond, will aim to lead or lead $25 million to $40 million rounds, Aggarwal told londonbusinessblog.com in an interview.
Nilekani, co-founder of IT services giant Infosys and who has been instrumental in developing and evangelizing several of India’s digital initiatives, including biometric IDs Aadhaar, and Aggarwal, who now founded IBM-owned BPO firm Daksh, launched Fundamentum in 2019 to support consumer-focused and software-focused startups.
“The digital acceleration caused by the pandemic has dramatically increased technology spending around the world. India has all the ingredients: capital, entrepreneurs, success stories and liquidity. In this decade, we will see large-scale entrepreneurs have a material impact on the country as the digital intensity of society increases,” Nilekani said in a statement.
“We are in the early stages of that journey. At Fundamentum we tested the waters with the first fund. We now plan to dig deeper into our investment program, focusing on entrepreneurs creating sustainable businesses from India and steadfastly supporting them in their exciting journey.”
The company, which has evaluated more than 500 startups, has made half a dozen investments to date, and its portfolio startups have collectively raised more than $1 billion in follow-up rounds, it said. Fundamentum’s portfolio includes unicorn online pharmacy Pharmeasy and auto marketplace Spinny.
Fundamentum’s new fund is almost entirely backed by Indian entrepreneurs, it said. “We believe that entrepreneurial capital is superior. It makes money,” Aggarwal said.
“Since we are all entrepreneurs, we have that bias,” he added, without ruling out the possibility of Fundamentum opening the fund to institutional investors in the future.
The second largest internet market in the world has seen the rise of several local venture capital funds and has also attracted dozens of high profile investors over the past 12 years. Sequoia, Accel and Lightspeed, all of which have been investing in the South Asian market for over 10 years, recently announced new funds.
SoftBank, Alpha Wave Global and Tiger Global have also accelerated their investments in India in recent years. SoftBank invested more than $3 billion in India last year alone. Tiger Global has invested $6.5 billion in the country so far, londonbusinessblog.com reported earlier.
Fundamentum’s new fund comes at a time when startups in India – and beyond – are finding it increasingly difficult to raise capital on terms considered favorable from last year’s bull cycle norm. Aggarwal said many reputable start-ups have closed new rounds in India in recent quarters, so there is enough dry powder to continue supporting young startups.
For startups in the growth phase, it is a slightly different story. “The growth capital that used to come to India has dried up,” he said. Aggarwal acknowledged the shift in industry dynamics and said valuation questions have corrected and deal flow has remained strong. “So you now have time to do more due diligence and invest at the right prices,” he said.