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3one4 Capital hits first close of third VC fund
Photo Credit: VCCircle

Early-stage venture capital firm 3one4 Capital said Wednesday it has marked the first close of its third fund that seeks to raise $100 million (around Rs 730 crore), which is more than double the size of its previous fund.

The new fund has received subscription for 40% of its targeted corpus, 3one4 Capital said in a statement, without specifying the exact amount it has raised as part of the first close.

A first close is a milestone in a fundraising activity after which venture capital and private equity firms begin to deploy capital.

Both new and existing Limited Partners (LPs), or investors, committed capital for the new fund. The LPs include family offices, endowments, foundations, and corporate and financial institutions, the VC firm said. It didn’t identify the LPs.

3one4 Capital’s LPs in previous funds have included individual investors such as Infosys co-founder Kris Gopalakrishnan, AJ Capital CEO Abhinav Jhunjhunwala, Amansa Capital CEO Akash Prakash, Westpac International president Bala Swaminathan and former Reliance Capital executive Madhusudan Kela.

Reliance Ventures, an arm of billionaire Mukesh Ambani’s Reliance Industries Ltd, had also come in as an investor in its second fund.

Family offices’ contributions had come from Infosys co-founder Nandan Nilekani; Catamaran Ventures, floated by Infosys co-founder NR Narayana Murthy; and the promoters of electrical equipment Havells.

Established in 2015, tech-focused 3one4 Capital is managed by Pranav Pai and Siddarth Pai, sons of TV Mohandas Pai, a former finance chief at software services firm Infosys and an active angel investor.

The third fund will continue with the VC firm's strategy of investing in 25-30 startups from each vehicle. In terms of sectors, it will focus on software-as-a-service and enterprise automation, direct-to-consumer, media and content, fintech and deep technology. The fund’s average ticket size is likely to be between $500,000 and $4 million.

The VC firm launched its first fund in early 2016 and raised Rs 100 crore (about $15 million). It marked the final close of its second fund last year at Rs 250 crore ($39 million), exceeding its target corpus after exercising the overallotment option.

Besides these main funds, the VC firm also has two other funds – the opportunities fund (Continuum I) and seed fund (Rising I) – which marked their final close in December last year.

The firm’s portfolio includes human resources startup Darwinbox, online meat and fish ordering startup Licious, biotech firm Bugworks, ed-tech startups Magic Crate and Oust Labs, fintech startups Faircent.com and SwitchMe Technologies, farm-tech firm Aibono, vernacular news aggregator Lokal and audio platform Kuku.

Last month, it invested in nutrition-tech company Habbit Health and Nutrition Pvt. Ltd.

3one4 Capital's fundraising milestone comes at a time when the coronavirus pandemic has virtually crippled economic and business activity in India and the world.

Startups, which rely more on investor capital rather than on bank borrowings or their earnings, bore the brunt of the national lockdown that was imposed in late March to curb the spread of the infection.

The announcement of a fundraising milestone is a silver lining for the startup ecosystem during these times.

A few other VC firms have also announced fundraising milestones earlier this year while some have hit the road to raise a new fund.

Lightspeed India Partners raised $275 million (Rs 2052 crore) for its new fund last month while Sequoia Capital raised a record corpus for India and Southeast Asia investments in July.

In July, VCCircle reported that Equanimity Investments marked the final close of its debut fund with an oversubscription.

In May, VCCircle reported that domestic early-stage VC firm Stellaris Venture Partners had hit the road to raise a new fund to raise more capital than its debut investment vehicle. Sixth Sense Ventures is also floating its third consumer-focused fund.

Also in May, venture capital firm Iron Pillar, which provides growth capital to mid-stage technology companies in India, said it had topped up its first fund with $45 million.

A few VC firms such as Blume Ventures and Unicorn India Ventures had also hit fundraising milestones before the pandemic gripped India. Earlier this year, co-founders of Parampara Capital also floated a second fund that seeks to raise $100 million.

In 2019, around a dozen venture capital firms including Accel, A91 Partners and Lightbox marked the final close of their funds.

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