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Nuziveedu Group chairman Prabhakar Rao anchors early-stage fund Utthishta 

Utthishta Yekum Fund, a seed fund targeting $9.2 million and focusing on technology startups, has made its first close.

Hyderabad-based has made the first close of its debut fund targeting Rs 50 crore ($9.2 million), to invest in technology startups across the country.

Utthishta Yekum Fund, a seed fund registered with SEBI, has managed to raise Rs 31 crore ($5.7 million) from its anchor investor and asset management company. The fund expects to raise the remaining amount from a mix of high networth individuals (HNIs) and institutional investors.

The fund is being anchored by M Prabhakar Rao, chairman of Nuziveedu Group which has interest in agriculture, renewable energy, real estate, textile and sugar. Three of his group firms (Nuziveedu Seeds, NSL Renewable Energy and Regen Powertech) have attracted over $160 million in funding from private equity investors like the Blackstone Group, IFC, Everstone Capital, IDFC Private Equity and FE Clean Energy, among others.

Utthishta Yekum Fund has been registered under SEBI’s new Alternative Investment Funds (AIFs) guidelines in Category I. Utthishta means ‘to arise’ in Sanskrit while Yekum means one. While the fund is targeting Rs 50 crore, it has the option to raise another Rs 20 crore, taking the total to Rs 70 crore. The asset management company – Utthishta Management Advisors – has invested Rs 1 crore, as required under the new norms.

Fund strategy

Utthishta, which works as an incubator-cum-accelerator, is being led by Mohsin Khan and Rama Krishna. Khan was earlier a manager with General Motors and then set up India offshore operations of the US-based insurance company Conseco. As managing director of Conseco Data Services where he also held stake, Khan developed it from a single person to a 370-strong team before quitting to set up Utthishta. Krishna was earlier with the auditing major PwC where he advised clients on fundraising, among other initiatives.

The fund’s investment committee includes Sarath Naru, founder of the venture capital firm VenturEast, and JA Chowdary, former president of Nvidia Graphics India and also an angel investor.

Utthishta will focus on startups in software, web, mobile and the cloud computing space. “A good portion of IT companies in India have been working on services model which is now mature and will eventually face inflationary pressure and other cost increase. Sustainability of the business over the next decade will be tough and entrepreneurs need to be innovative to create a different set of companies which would leverage the talent pool in IT,” said Khan.

“We will focus on very early-stage startups, even where the idea/product/website has one customer,” he said, adding that the preference will be for a team of 2-3 co-founders but it will also look at startups with solo founders.

Utthishta is currently screening startups for its first batch and claims to have 400 applications for the same. It has selected 15 startups for its investment committee, out of which shortlisted startups will get Rs 10 lakh each.

Utthishta will host two batches of 10-15 startups every year, which will attend a four-month programme. It will also provide office space; legal, accounting and company setup advice; and mentoring during this period. Finally, there will be a demo day for startups to pitch their businesses to venture capitalists and angel investors.

While several entrepreneurs have anchored or formed early-stage venture firms, they have mostly come from technology background. NS Raghavan of Infosys is anchor investor at Ojas Venture Partners while the company’s co-founder NR Narayana Murthy has set up sector/stage-agnostic firm Catamaran Ventures.

Recently, AppLabs founder Sashi Reddi formed Sri Capital and Patni Computers’ founder set up Nirvana Venture Partners after selling their respective companies. Most recently, Venu Raman Kumar, who sold his stake in NASDAQ-listed clinical documentation technology solutions firm MModal (formerly CBay Systems), also set up a stage/sector-agnostic fund.

Utthishta comes at a time when a number of accelerators/incubators like VentureNursery (backed by Fame Cinemas founder Shravan Shroff and Starcom MediaVest Group executive Ravi Kiran), The Hatch, Srijan Capital, AngelPrime and Morpheus Venture Partners have also come up and made their presence felt in the Indian startup ecosystem.

Early-stage investments are on a high in CY2012, with a record number of transactions. According to VCCEdge, the data research platform of VCCircle, there have been 291 deals till date in 2012, compared to 273 deals in entire 2011, which was a record year in terms of early-stage deal volume. The deal value during 2012 (till date) has touched $895 million, compared to a total of $1.03 billion in 2011.

(Edited by Sanghamitra Mandal)

Utthishta Yekum Fund is a $9 million seed fund managed by Utthishta Management Advisors LLP with an green shoe option of $4 million. It seeks to invests in early stage startups in India. The fund invests in software, web, mobile and the cloud computing space. It also provides office space, legal, accounting and company setup advice and mentoring during a four-month programme. The fund typically invests $0.02 million in each startup.

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