AVCJ Awards 2019: Fundraising of the Year - Venture Capital: A91 Partners

By the time Abhay Pandey, Gautam Mago and V.T. Bharadwaj, all managing directors at Sequoia Capital India, spun out from the VC giant earlier this year, they had been working together for more than 15 years. So, it may come as little surprise that discussions around striking out on their own to form A91 Partners had time to gestate.

“More concrete thoughts emerged in 2017 and were firmed up in 2018,” Pandey says. “We saw two partnerships at Sequoia, and many aspects of our culture [at A91] evolved from our learnings: small team, one office, long-term approach to incentives, competition should always be outside the building. We have also evolved a nuanced approach to the tight balance required in our business between consensus and conviction for investment decision making.”

A91 closed its debut in July at $351 million after four months in the market, with a group of Indian founders and family offices committing about 20% of the fund even before the firm had started to reach out to institutional players. In addition to providing capital, a few of the individual investors made introductions to their LPs. Several connections, whom the A91 founders knew from sitting on various boards, also acted as references.

Further contributions came from the likes of Asia Alternatives and the International Finance Corporation, which contributed $20 million. Pandey describes the process of finding an anchor as including a number of memorable conversations including suggestions to merge with another venture capital firm and giving away a significant part of the GP interest.

A91 found that technology had democratized the process of reaching LPs to some extent and it helped the firm cast a wide net.  The VC reached out to more than 150 investors and quickly narrowed the list to about 25 serious conversations, of which 15 eventually participated.

“It was an intense process where we went around the world four times in five months, including 17 meetings in two days in Hong Kong,” says Pandey. “In retrospect, we enjoyed the process as it was very satisfying to see the interest and momentum build around the fundraise with every meeting, and that continued to increase our own conviction in our strategy.”

Sourcing strategy

A91 plans to make up to 15 early-stage commitments from the vehicle across the consumer goods and services, financial services, healthcare, and technology sectors. Deal sourcing will entail a mix of techniques, leveraging close relationships with other VC firms as well as cold-calling to find bootstrapped companies that have no institutional funding prior to our engagement. There will be a strong emphasis on companies that have gone unnoticed with low-key founders keen to minimize fundraising in favour of focusing on their business.

The first investment was made in January 2019 with an approximately $10 million commitment to Sugar Cosmetics, a seven-year-old online retailer based in Mumbai that markets a range of makeup, bath and body, and fragrance products. The A91 team has previous experience in this space as investors in Vini Cosmetics and the Indian arm of Canada’s Faces Cosmetics. Sequoia acquired Faces from Everstone Capital in 2017 for about $40 million and invested at least $47.6 million in Vini across two rounds.

A91’s second investment was Hector Beverages, a drink maker also known as Paper Boat where Bharadwaj served as a director while at Sequoia. As with cosmetics, Pandey, Mago and Bharadwaj are expected to readily bounce off their background in this space; Sequoia contributed to at least three rounds for brewery Bira 91 between 2015 and 2018. Most recently, A91 joined a $10 million Series A round for Atomberg Technologies, a manufacturer of smart, energy-efficient household appliances that is said to be one of India’s top sellers of ceiling fans. 

Sign of the times

Perhaps the most significant aspect of the firm’s success to date, however, is how routine the story seems to have become. It is one of several Indian VCs that have emerged from existing GPs in recent years. Competitors include a number of Helion Venture Partners spinouts such as Stellaris Venture Partners, Fireside Ventures, and The Fundamentum Partnership. In addition, veterans of Matrix Partners India and SAIF Partners have launched Epiq Capital and Pravega Ventures, respectively.

In this sense, A91’s debut might suggest that India’s VC ecosystem is coming of age. This can be seen in a rapid proliferation in the number of local unicorns – now said to top 30 – and a general modernization of the economy through government moves to ramp up entrepreneurship such as a digital ID scheme, a universal payments interface system, a demonetization initiative, and a popular new goods and services tax regime. For Pandey, the scenario appears set to produce more A91-style stories.

“The Indian investing ecosystem is still very young. As we gain more experience, it is natural to expect more spinouts,” he says. “It takes 10-plus years in this business to establish a track record, and as more teams gain that working together, we will see them get the confidence and conviction to do it on their own. I am certain that other groups within established firms are looking at the A91 experience and asking themselves the question.”

Pictured: Morgan Stanley's Pamela Fung with (left to right) Abhay Pandey, Gautam Mago and V.T. Bharadwaj of A91 Partners

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• Topics
• South Asia
• Venture
• Fundraising
• GPs
• Technology
• India
• A91 Partners