Homegrown VC Blume Ventures marks first close of its third growth fund at Rs 200 cr

Mumbai-based venture fund Blume Ventures announced the first close of its new opportunity fund—Fund 1Y—at Rs 200 core. 

The capital from Fund 1Y will used to buy out breakout companies from Fund I such as Intrcity, Cashify, Carbon Clean, and Zopper and allied investment vehicles. Part of the fund will also be utilised to invest in the existing winners of other funds. 

With a target of Rs 400 crore, Fund 1Y saw backing of many of Blume existing Limited Partners (LPs) or investors, the company said. The 13-year-old venture fund was established in 2010 by Karthik Reddy and Sanjay Nath. The company said LPs in its first fund have started seeing meaningful returns on the capital they invested and are returning as investors in Fund 1Y.

Notably, the fundraising comes six months after the company made the final close of its fourth fund at $250 million, which was oversubscribed from the original target of $200 million.  

Opportunity funds in venture capital focus on providing capital to later-stage, high-growth companies with the potential for significant value appreciation. Blume Ventures raised a similar-sized opportunity fund in 2021, which has backed strong performers from its first fund.

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It also raised opportunity funds in 2018 and 2022 which were deployed to doubling down on its investments in portfolio firms such as Exotel, Grey Orange Robotics, Smallcase, Slice, Unacademy, and WebEngage.

The home-grown VC said it has implemented a distinctive growth investing strategy by utilizing Continuity Funds to maximize returns on their successful investments over extended periods. This strategy involves two key objectives. Firstly, acquiring stakes in promising portfolio companies from its previous funds at pre-validated price points identified by follow-on investors, and by retaining these positions until they hit profitability and go for public listing. Secondly, it would inject additional capital into breakout businesses alongside follow-on investors, thereby providing an effective way for the LP base to participate in high-quality enterprises.

“It’s a global practice for Fund Managers like Blume to provide exits to the existing LPs by finding new investors who can buy out a combination of assets from the original Fund. Blume is one of the first VCs in India to have executed this structure with the new investors also being onshore. The current environment and our unique strategy allow us to balance the interests of our current and incoming investors and hold the best of our companies for another 3-4 years before eventual public listing and create wealth for the local ecosystem,” Reddy said. 

Originally launched as a “Superangel” fund, Blume went on to raise $20 million in Fund I and invested in over 60 start-ups. It raised successor funds in 2015-16 and 2018-19, growing to a $60 million Fund II and a $102 million Fund III. A handful of unicorns were born out of these two funds including edtech firm Unacademy, fintech start-up Slice, and used car retailing platform Spinny. Delivery start-up dunzo, edtech firm Classplus, device management firm Servify, application testing firm Lambdatest, and spacetech start-up Pixxel are among its portfolio from Fund II and III.

Along with Fund 1Y, Blume manages ‘Continuity’ funds including secondary funds (Fund I winners), opportunity funds (Fund I and II winners) and other Special Purpose Vehicles (SPVs).

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