India's Kae Capital closes Fund III on $94m

Foreign LPs include Old Mutual Wealth and Velo Partners of the UK. In a social media post, Kae also identified Finext, the name of several European investment organisations.

There was a strong showing from family offices, including SRF Family Office, and investment units related to the founders of Infosys, Allcargo, Hero Enterprise, and DSP Investment Managers. The family office of Shashank Singh, a partner at Apax Partners, also contributed.

Further support came from HDFC Holdings and Small Industries Development Bank of India (SIDBI), as well as entrepreneurs from Fractal Analytics, Blackbuck, BookMyShow, Nazara, MakeMyTrip, and Jupiter. Singh led Apax’s acquisition of a 45% stake in Fractal in 2019, which was partially exited in January.

A first close of INR 1bn came in September 2019, according to AVCJ Research. Fund II closed on USD 53m with support from SIDBI, while Fund I raised USD 25m in 2012.

Fund III will invest in 25 companies, writing cheques of up to USD 3m, compared to USD 1m for its predecessors. Most of the corpus is for follow-on investments, with favoured categories including software-as-a-service, financial technology, and direct-to-consumer brands.

“We are asking our companies to have enough capital for the next 24 months because we believe that it is going to get worse before it gets better,” Sasha Mirchandani, Kae’s founder and managing partner, told The Economic Times, flagging elevated early-stage valuations and macro risks.

“So, companies which are well capitalised and have planned their businesses for a new world of slower growth and higher inflation will come out better because of much-prepared balance sheets.”

Mirchandani, also the founder of Mumbai Angels, set up Kae in 2012 with a view to making the first investments in B2B and B2C companies focused on growing and modernising India.

In addition, the founding team included Navin Honagudi, who rose to the level of managing director before leaving earlier this year to set up Elev8 Venture Partners, a growth-stage firm, with support from Mirchandani. Honagudi remains a venture partner at Kae.

Kae has invested in more than 80 start-ups to date. Standouts include intra-city logistics provider Porter, digital healthcare platform 1mg, and Zetwerk, a manufacturing marketplace recently valued at USD 2.7bn.

Fund III has made several investments, including skincare brand Foxtale, engineering analytics platform Hatica Technologies, and gold loan provider Bold Finance. Earlier this year, it participated in a USD 20m round for artificial intelligence-based chat therapy service Wysa and a USD 26m round for retail network 1K Kirana Bazaar.

India’s seed-stage space has seen a surge in fundraising activity in recent months with launches from the likes of Axilor Ventures, Fundamental VC, Inflection Point Ventures, Pi Ventures, and Athera Venture Partners. Micro VC investor Artha India Ventures and Sequoia Capital India’s Surge program have also raised new funds.

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