India's IvyCap secures foreign LP backing for Fund III first close
India’s IvyCap Ventures is progressing on efforts to diversify its LP base, with 15% of the first close commitments in Fund III coming from international investors, while many of its domestic institutional backers re-upped.
The first close, amounting to INR 16.1bn (USD 214m), includes international family offices and fund-of-funds. They are participating through a Singapore-based feeder vehicle. On the domestic side, IvyCap has won backing from State Bank of India, HDFC Life, and Life Insurance Corporation of India. The overall target is INR 25bn.
The firm closed its debut fund on INR 2.4bn in 2013 supported by 20 domestic institutional investors. A successor vehicle of INR 5.35bn was raised in 2017. Historically, institutional players have accounted for 70% of IvyCap’s funds. Family offices and the IIT Alumni Trust have accounted for 10% and 20%, respectively.
The trust was established to draw on the resources of graduates from Indian Institutes of Technology (IIT) and it reinvests a portion of the profit back into academic foundations and endowments. It is not only a source of capital for IvyCap, but also binds alumni to the firm – as founders of or mentors to portfolio companies.
Ashish Wadhwani, a managing partner at IvyCap, claims the firm has raised more capital from domestic institutional investors than any venture capital player in the market. He sees the alumni connection as integral to this and a key point of differentiation.
“Our entire value proposition is the alumni ecosystem – as a means of supporting fundraising and deal flow, and as a source of expertise and entrepreneur talent,” Wadhwani said. “LPs recognise this approach is working. It gives us differentiated deal flow and an amazing ability to add value, and we have demonstrated that across two funds, returning significant capital to our investors.”
Last year, IvyCap completed the largest-ever exit, in rupee terms, from a VC investment in India. Sequoia Capital India led a USD 45m Series D for beauty e-commerce platform Purpple at a valuation of USD 300m, taking out the entire position held by IvyCap’s first fund. It generated a 22x multiple and returned 135% of the Fund I corpus. The firm remains an investor in Purplle through Fund II.
Clovia, a lingerie and sleepwear retailer, generated a 10x return and Wadhwani expects the same from online jewellery business Bluestone. Five out of the 10 Fund I portfolio companies have been exited as have two of the 23 in Fund II, with an additional two pending. The IRR across both funds is approximately 25%.
Fund III will follow the same strategy as its predecessors, focusing on Series A and B rounds for technology-enabled start-ups in consumer, healthcare, education, and financial services as well as software-as-a-service and deep-tech. However, there will be a larger allocation for follow-on investments in existing portfolio companies.
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