Aavishkaar Venture Management, a venture capital firm focused on India’s rural areas and bottom-of-the-pyramid space, has made the first close of its new fund at $62 million within nine months after its launch.
Aavishkaar India II Company Ltd is targeting $120 million and expects a second close by the end of the current calendar year and a final close by June next year. The second close is expected to be at $75 million, Vineet Rai, founder and CEO of Aavishkaar, told VCCircle.
The new fund, raised from overseas institutions, has seen participation from development finance institutions like International Finance Corporation (IFC), German government-owned bank KfW, Dutch development bank FMO (which has invested $7.5 million) and the UK-based CDC Group. The fund has also seen a commitment from Cisco Systems, Inc., the telecom networking equipment major.
“It’s a tough market and you clearly need to have differentiation and track record, even after which fundraising takes time,” said Rai about the fundraising experience.
Aavishkaar India Micro Venture Capital, the predecessor to the current fund launched in 2001, took nearly seven years to make a first close in August 2007 at $6 million, followed by a final closing in January 2009 at $14 million. However, the current fund was launched only in January this year, which reflects the limited partners’ appetite for the investment strategy.
Also, with rural India becoming much more exciting and Aavishkaar’s portfolio companies scaling up, the current raise got the boost it needed, said Rai. This will be the fourth fund for Aavishkaar, which was a first-time fund manager during the micro-venture fundraising. The firm, which recently completed its 10th anniversary, expects to have $200 million under management by the middle of 2012.
Aavishkaar also made three partial exits last year when Silicon Valley-based VC firm Canaan Partners picked up half its stake in the microfinance firm Equitas while Grassroots Business Fund acquired stake in micro-venture funds portfolio companies Servals Automation and Shree Kamdhenu Electronics.
Aavishkaar India II will be a successor fund to Aavishkaar India Micro Venture Capital Fund in terms of strategy – the key difference being the ability to write larger cheques and invest across various stages of its portfolio companies. The new fund, with much more gunpowder, will look to invest $500K in early-stage firms and can go up to $10-12 million in later-stage transactions. Aavishkaar India II already has a couple of deals in the pipeline and expects to announce a transaction soon. The fund will focus on scaling up affordable models that target the ‘bottom of the pyramid’ in healthcare, water and sanitation, education, agriculture, renewable energy and other emerging sectors.
Incidentally, its predecessor, the four-year-old Aavishkaar India Micro Venture Capital Fund, was an MSME-focused fund of $14 million, which is fully committed. It has invested in 23 companies such as GV Meditech, B2R (Business to Rural) Technologies, Saraplast Pvt Ltd, Milk Mantra, Vortex Engineering and Waterlife.
Vineet Rai-led Aavishkaar Venture Management Services Pvt Ltd has backed three funds earlier. While it is the advisor to Aavishkaar India Micro Venture Capital Fund, it is also a sub-advisor to Aavishkaar Goodwell India Microfinance Development Company (AGMIDC I with a corpus of $18.3 million) and AGMIDC II (that achieved its first closing in December 2010 at $10 million). These two funds happen to be a joint venture between Aavishkaar India and Dutch micro finance organisation Goodwell.