Karnataka Information Technology Venture Capital Fund (Kitven), managed by the Karnataka Asset Management Company Private Ltd, is close to making its third investment from its Rs 26.25-crore second fund targeting investments in IT, biotech and nanotech industries in the state.

Kitven Fund 2 may be looking at investing Rs 2-2.5 crore, what is typically its range, in Bangalore-based Sloka Telecom, a radio access network solution provider. Sloka designs, develops and sells compact and cost-effective base stations for new standards such as fixed WiMAX and mobile WiMAX. Founded in 2004 by wireless and telecom industry professionals Sujai Karampuri and Venkata Subbaiah, Sloka is working on technologically advanced, cost-effective and appropriate solutions for broadband wireless, voice, and video applications targeting rural and urban markets.

An e-mail sent to Sloka CEO Sujai Karamapuri did not elicit a response at the time of posting this story. Kalozal Consultants is advising Sloka on the transaction.

Kitven Fund CEO A R Jayakumar declined to offer any specific comments but said there were a few deals in the pipeline. Only in April, Kitven 2 announced its first investment in the lifesciences and biotech space with Mitra Biotech in a round where Accel Partners too co-invested. The second fund, which is currently in investment mode, has also invested in Pawaa Software, which is in the data leak prevention space. Kitven Fund 2 has raised funding from Karnataka State Industrial Investment & Development Corporation Ltd (KSIIDC), Karnataka State Financial Corporation (KSFC), Small Industries Development Bank of India (SIDBI) and Karnataka Bio-technology & Information Technology Services (KBITS). Unlike the first fund, which invested only in IT during its nearly 12-year life cycle, the second fund has a broader mandate.

The first fund, with a corpus of Rs 15 crore, invested in 17 companies and has made 12 exits. Kitven is looking at some more exits soon from the first fund portfolio and at closing the fund by the fiscal end. “I think we could be talking of an IRR of 10-12% from the first fund during the 10 to 12-year cycle,” Mr Jayakumar said. Some of the first fund portfolio and exit routes read like RelQ Software (acquired by EDS), ECAD Technologies (acquired by AT&S), Proteans Software (acquired by CAMO), Logix Microsystems (IPO), Cerebra Integrated Technologies (IPO), Indegene (strategic investment), Comat and Telibrahma (secondary sale).

Apart from these two funds, Kitven’s scope and level of activities could potentially increase if some of these state government proposals are implemented. The state government is keen to set up three exclusive funds targeting the biotech, semiconductor and SME space. 

According to the state biotech policy, the government has announced a Rs 50-crore bio-venture fund (KBio-Ven Fund) to be set up jointly with a professional VC firm. The fund, in which the state government will hold 26% stake and the rest will be held by VC firms and financial institutions, will focus on hi-tech areas such as transgenics, stem cell biology and bio manufacturing. Similarly, the semiconductor policy says, the state will contribute a sum of Rs 25 crore to the Kitven IT Fund as 26% contribution (with the balance to be raised from the market) for investing in semiconductor firms.

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