Global private equity investment firm HarbourVest Partners LLC has come in as the single Limited Partner (LP), or investor, in the $300 million (Rs 2,129 crore) venture capital fund floated by former executives at Norwest Venture Partners and Freshworks Inc.
The fund, managed by Avataar Venture Partners, will invest in growth-stage companies in business-to-business (B2B) and software-as-a-service (Saas) sectors.
“There is no particular geographical preference for our investments but it will pretty much be India dominated,” Mohan Kumar, founder and managing partner, Avataar Ventures, told VCCircle.
The fundraising process began in October and Kumar met seven to eight LPs but finally went with HarbourVest.
Kumar said the firm would have liked to have two or three LPs but we decided to have HarbourVest due to its sheer size and its capability to write a big cheque on its own.
“I must say that there are both advantages and disadvantages to having a single LP,” he added.
Prior to starting Avataar, Kumar was with Norwest Venture Partners.
Notably, Avataar's fund has already kick-started its investments by acquiring stakes held by Norwest in a portfolio of six companies -- Appnomic Systems, Elastic Run, Zenoti, CRMNext, Manthan Systems and Capillary Technologies. The deal was pegged for $180-200 million, according to media reports citing sources.
“I had discussed with Norwest on buying out its stakes in the companies last year itself and they had agreed in-principle to consider if the deal was reasonable,” said Kumar.
Kumar, who officially left Norwest in December last year, will continue to be on the board of three to four Norwest companies till the time of the exit.
Avataar's co-founder Nishant Rao was chief operating officer at Accel-backed Freshworks between 2015 and 2017. He also served at LinkedIn as managing director, LinkedIn India and extended parts of Asia before his stint at Freshworks.
The fund, which is registered in Mauritius, plans to invest in companies with core operations in India and Southeast Asia. Its typical ticket size is expected to be $10-30 million in companies that are churning out annual recurring revenues of $15 million.
Avataar's fund launch is reminiscent of the way another venture capital firm Lightbox was formed through a secondary transaction. Lightbox was founded in 2014 after taking over stakes in six portfolio companies of Sherpalo Ventures and Kleiner Perkins Caufield & Byers. While the six companies became part of Lightbox Ventures' first fund, the VC firm also raised $100 million for a second fund at the same time.
The US-based global private equity firm, which has over $60 billion in assets under management, handles fund of fund investments as well as direct co-investments with other PE firms it has backed.
The investment in Avataar gives it the first direct exposure to a VC fund operating in India.
In India, HarbourVest has invested in Bengaluru-based microlender Janalakshmi Financial Services Pvt. Ltd. It is is also a co-investor in Gurugram-based lending company Clix Capital.
HarbourVest had announced the final close of its new fund at $1.7 billion last year.
The fund, which focuses on Europe, Asia and emerging markets, is named HarbourVest International Private Equity Partners VIII Partnership (HIPEP VIII).