Fund focus: Epiq renews brute force India tech strategy

Rishi Navani, founder and managing partner of Epiq Capital, estimates that 90% of India’s unicorns raised their Series A funding from five firms: Sequoia Capital India (now Peak XV Partners), Accel Partners, Matrix Partners India, Lightspeed India Partners, and Elevation Capital.

“Effectively, the best entrepreneurs all go through these firms, and so by definition, the people who run these firms have the best access in India by far,” Navani (pictured) said. “Why does Epiq have that access? Because I built one of those firms from scratch.”

After helping India’s WestBridge Capital establish a Silicon Valley base in the early 2000s, Navani co-founded Matrix India in 2006, implementing a founder-centric investment approach that he transferred to Epiq with its establishment in 2016. “Our focus is entrepreneurs. A lot of other firms are analysing all kinds of information,” he said.

Epiq claims to look at every Series A company in India, without exception, which usually amounts to slightly more than 200 start-ups a year. Navani refers to it as a “brute force” method: look at them all, follow the interesting ones, and reach out to them directly. The firm spends about 30% of its time looking for companies and 50% evaluating them; the remainder is devoted to working with investees.

This history and playbook have proven convincing with LPs. Epiq’s debut fund – now sitting on an IRR of about 40% – closed on USD 100m in 2017, while Fund II formally closed last week with USD 225m in commitments, beating a USD 200m target.

A first close of USD 100m came in December 2021. Soft commitments for almost the entire corpus have been in place for the past six months, but the official announcement was delayed by regulatory requirements.

COVID-19 travel restrictions were responsible for the most striking difference between the two processes. Whereas Fund I came mostly from international institutions, Fund II is 75% domestic and 50% high net worth individuals (HNWIs).

Navani described the HNWIs as including four of the 10 most powerful tech entrepreneurs in India, “every leading industrialist in literally every subsector in India,” and adding flavour, the country’s top-five sports and entertainment personalities. He claims 95% of them have never invested in a private fund.

Part of the attraction here can be explained by Navani’s observations that HNWIs are migrating away from real estate, gold, and fixed deposits toward technology and public markets. This plays to Epiq’s thesis, which is squarely focused on populating the leader boards of domestic stock exchanges with digital, new-economy companies.

Candidates for investment must have the potential to be worth USD 50bn or more as public companies in the next 10 years. “If an entrepreneur tells us his ambition is to get to USD 3bn and sell the company, that’s not for us,” Navani said.

Investors may also have been impressed by the household names already in Epiq’s portfolio, including eyewear retailer Lenskart, social media player DailyHunt, and fitness app Curefit. All three are unicorns and are considered likely to go public within two years, providing Epiq with its first exits.

Selectivity is key to the strategy. There are only eight companies in Fund I, now fully deployed, and Fund II is planned to invest in 8-10. Five slots are already taken. They are Lenskart, clinic operator Pristyn Care, parking services start-up Park+, education platform Teachmint, and Builder.ai, an artificial intelligence provider that recently partnered with Microsoft.

Most of Epiq’s capital is concentrated in five companies: Lenskart, DailyHunt, Curefit, Pristyn Care, and Builder.ai. Navani claims three of them are already profitable (the other two are close) and that all five grew their collective revenue 135% during the 12 months to March. Lenskart alone is said to currently represent a paper gain of 7x.

Across the entire portfolio, companies have sold more than USD 1bn of secondary shares but none of those belonged to Epiq. The confidence is also reflected in a GP commitment to Fund II of 5%. “I think that helps a lot,” Navani said. “I haven’t taken a salary since we started Epiq Capital, and I have no plans to.”

Fund II will go later stage than its predecessor, writing cheques of up to USD 25m – versus a previous range of USD 5m-USD 10m – but will otherwise stick closely to Epiq’s existing strategy. Competition, expectations, uncertainty, and valuations are all elevated in the current environment, but Navani sees it as a great time to hunt category champions.

“I think a lot of the top companies in India are sitting on a lot of cash, so you’re probably going to see a prolonged period of what I call time correction, but not huge valuation cuts,” he said. “In very heady times, good and great look similar. In tough times, great tends to outperform a lot.”

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• Topics
• South Asia
• Fundraising
• GPs
• Venture
• Technology
• India
• Epiq Capital
• HNWIs
• IPO
• Fundraising