India's Chiratae seeks USD 700m for VC, growth funds
Chiratae Ventures is looking to raise USD 700m for deployment in India’s technology sector with the addition of an opportunity fund – to participate in mid to late-stage rounds – alongside its core VC vehicle.
The opportunity fund will launch first, seeking USD 200m, and it will be followed by Chiratae Ventures V, which is targeting USD 500m, Sudhir Sethi, the firm’s founder and chairman told Mergermarket, AVCJ’s sister title.
Chiratae closed its fourth fund on USD 337m in August 2021, beating a target of USD 275m. In addition to international institutional players such as CDC Group, the International Finance Corporation (IFC), and the US Development Finance Corporation (DFC), the LP base includes Indian family offices and a fund-of-funds under Small Industries Development Bank of India.
Just over half of Chiratae’s capital comes from local investors, with Sethi describing the firm as “the largest rupee capital raisers in VC alternative assets in the country.” However, there are plans to open an office in the US to support fundraising efforts, as well as support follow-on fundraising and overseas expansion by portfolio companies and to secure exits.
Portfolio companies raised USD 2.1bn in follow-on funding in 2021, of which 90% came from international investors. These companies also rely on exports for nearly 10% of revenue, and Sethi expects this to reach 20% within five years. Meanwhile, nine out of every 10 exits made by Chiratae are through stake sales to foreign private equity firms and strategic players.
Chiratae was founded in 2006 as IDG Ventures India by Sethi, T.C.M. Sundaram, and Manik Arora, with the latter stepping down in 2015. A debut fund of USD 150m launched in 2007, followed by successor vehicles of USD 96m and USD 208m in 2013 and 2016, respectively. Fund III was accompanied by a USD 17m sidecar. Total assets under management are USD 1bn.
The firm has backed 115 companies to date, with about 70 active investments. There have been 39 exits, with Chiratae claiming to be the only India VC to have returned capital to LPs for nine consecutive years.
The portfolio features Lenskart, MyGlamm, FirstCry, Curefit, and GlobalBees, each of which is valued at USD 1bn or above. A few more – such as PolicyBazaar, Newgen, and Yatra – once held unicorn status but are now listed. Other current portfolio companies include NestAway, Pixis, Vayana, AgroStar, Bizongo, Hevo, and Cropin.
“We have seven unicorns in our portfolio, which form 10% of India's total unicorns. Three have already gone public, and another seven to nine are lined up for potential IPOs. Besides, 21 firms in our system are market leaders,” said Sethi.
Chiratae typically deploys around USD 150m every year across 20 early-stage companies, committing USD 500,000 to USD 10m as a lead investor across Series A and B rounds. Its largest single investment to date is USD 40m. Areas of interest include direct-to-consumer brands, software, deep-tech, and technology-enabled solutions in healthcare, education, financial services, and agriculture.
“We will look at nearly 4,500 deals this year, compared to 3,000 companies evaluated last year. This year, the plan is to also invest in start-ups catering to the climate-tech space,” Sethi added.
Chiratae started out focusing on marketplaces like Flipkart before tilting towards specific verticals, such as Lenskart in eyewear and FirstCry in baby products. Now, the emphasis is on companies that exist at the intersection of horizontals (marketplaces, software-as-a-service, consumer, and deep-tech) and verticals (agriculture, financial services, education, climate, and healthcare).
Curefit is seen as fitting this profile because it caters to healthcare as a vertical and consumer as a horizontal. Similarly, Cropin, a technology provider for farmers, sits at the nexus of software and agriculture.
The firm is looking to add 15 people to its 30-strong team, partly a reflection of the larger pool of capital it will have to deploy. Sethi described the opportunity fund as a response to “the scale of growth in the Indian economy and our portfolio companies,” a sentiment underscored by the surge in technology sector funding in recent years.
Early and growth-stage investment reached a record USD 36.5bn in 2021, roughly four times the previous year’s total, according to AVCJ Research. Approximately USD 25bn went into growth-stage deals – a fivefold increase on 2020 – as the country’s unicorn population more than doubled to 90.
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