Fund focus: Blume gets early-stage boost

Blume Ventures' vision had grown beyond what its check sizes could deliver. The early-stage VC firm gained exposure to a wide range of Indian start-ups through its first fund and already achieved some successful exits, including the sale of Taxiforsure to Ola and the purchase of Zipdial by Twitter.

But spreading the INR1 billion ($22 million) corpus across several dozen companies meant it often had only a very small claim on the proceeds.

"We realized that we had very little control over our positions in those companies when we were sitting in the single digit space. And even though we had good exits, they hardly moved the needle in terms of absolute dollar returns," says Karthik Reddy, managing partner at Blume.

Having recently closed its second fund, Blume Ventures Fund II, at $60 million, the GP now plans to build on the experience gained in the first vehicle. Rather than spreading itself thin to gain exposure to a wide variety of businesses in the tech space as it has before, Blume will focus on obtaining bigger stakes in portfolio companies and narrowing its investment preferences.

With almost three times as much capital as the previous vehicle, Fund II is expected to give Blume considerably more financial muscle. Whereas in previous investments the GP committed up to $250,000 in pre-Series A rounds for stakes of 7-8%, now it can go as high as $500,000. Blume is also planning more follow-ons, with over 60% of the corpus earmarked for additional contributions to investees up to Series A round. It will continue its strategy of finding co-investors to come in alongside it on deals, including in follow-on rounds.

Technology remains the key focus. The new fund has already made more than 25 investments in companies such as retail technology developer SnapBizz and health and fitness app developer HealthifyMe. Most deals will concentrate on the consumer technology space, but the firm also expects its business-to-business portfolio to deliver considerable success.

"They're not necessarily going to attack American markets, but they will at least go and build a significant presence in regional markets in and around Asia," says Reddy. "And we've seen some success already. We think some of our biggest returns are going to come from that space."

The new vehicle also gave Blume the chance to broaden its LP base. As much as $40 million of Fund II comes from overseas investors - about half of whom are based in the US - in contrast to Fund I, which was mostly raised from Indian LPs. The GP sees this as a welcome step toward building a stronger profile among both LPs and investees.

"We just needed larger support, and since this is the foundation for what we hope will become a series of institutional funding-led future funds, that meant that we had to look at building a considerable international base as opposed to relying entirely on domestic capital," says Reddy.

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• Topics
• Technology
• Fundraising
• GPs
• Venture
• South Asia
• India
• Blume Ventures
• TMT