Venture capital (VC) firm India Quotient has raised $30 million for its third fund and it plans to add another $30 million later this year to the fund to invest in start-ups operating in financial technology, education technology, social networking and other consumer businesses and brands.
India Quotient, which invests mostly in seed-stage start-ups, will make about eight investments every year from the new fund, co-founder Anand Lunia said in an interview.
It has so far invested in 40 companies including fin-tech start-up Lendingkart, social network Sharechat and fashion brand Fab Alley from two funds totalling $23 million.
The third fund is its biggest by far, giving it significant firepower for making bigger early-stage bets.
“We have increased the fund size to increase the cheque sizes and make more follow-on investments. We used to invest Rs1-2 crore in each start-up. Now we want to write bigger cheques at the seed stage. This will give our companies more time to scale before they have to raise their next round. We also want to participate with bigger cheques in the Series A and B rounds of our companies,” Lunia said.
Many existing limited partners of India Quotient including Flipkart Group chief executive Binny Bansal, RB Capital Singapore and others have invested in India Quotient’s third fund.
New investors include B.R. Shetty, founder and chairman of UAE-based healthcare firm NMC Hospitals.
“The massive challenges that India and the developing world face in healthcare, finance and education can only be met by innovation. I believe the future in these sectors will be defined by entrepreneurs who make use of technology to offer solutions to the masses. India Quotient has been at the forefront of investing in such entrepreneurs in India right from the seed stage, and I’m happy to extend my support to them,” Shetty said.
India Quotient was started in 2012 by Lunia and Madhkar Sinha, graduates of Indian Institute of Management, Lucknow.
Before starting India Quotient, Lunia worked as chief financial officer at VC firm Seedfund, while Sinha was an investment manager at an impact VC firm Aavishkaar.
They later added two entrepreneurs Prerna Bhutani and Gagan Goyal as partners.
The Mumbai-based firm invests primarily in consumer internet companies and brands and avoids software start-ups.
From the third fund, it will also increase investments in logistics and healthcare start-ups.
Within consumer internet, India Quotient is one of the more experimental investors, making many “contrarian” bets, as Lunia puts it.
“We will continue the approach that we’ve taken. It’s zero or one—the companies that we invest in either become really big or they fail fast. We were the first ones to spot lending—that has become really big over the past two years. We were also the first ones to invest big in vernacular content and social networking. These two spaces have also become big now. We’ll stay away from ‘the flavour of the season’ like how hyperlocal grocery delivery was in 2015,” Lunia said.
India Quotient is one of the several seed-stage funds in India along with Kae Capital, Blume Ventures, Orios Venture and others.
In the next year, many VC firms including Kae, Blume, Sequoia Capital, Matrix Partners and Kalaari Capital are expected to raise new funds. VC firms typically raise new funds every three or four years.
Of late, limited partner confidence in VC firms has increased, helped by the performance of top start-ups such as Flipkart and Paytm and an increase in returns based on secondary share sales.