IvyCap Ventures set to close Rs 1000 crore third fund; may consider greenshoe option

Home-grown venture capital fund IvyCap Ventures is looking to close the fundraising process for its third investment vehicle in about two months, Business Today has learned.

The company expects to close the target corpus of Rs 1,000 crore fully in one go, and it may exercise a greenshoe option to expand the fund size. With the greenshoe option, the fund will be more than double the size of its predecessor – the Rs 535 crore second fund it had raised in 2017.

“We started the process for our third fund just three months ago. We are targeting it to be minimum of Rs 1000 crore, we are already close. We can take it technically beyond Rs 1000 crore as we can exercise a greenshoe option, we might exercise it,” Vikram Gupta, founder and managing partner, IvyCap Ventures, said.

Ivy Cap funds are anchored by the IIT Alumni Trust (20 per cent) while rest of the corpus is raised from 20 Indian institutional investors, including large banks and insurance companies. The whole of the target corpus for the third fund is coming from its existing LPs (limited partners), it may bring in some foreign LPs in the greenshoe option.

“We have not reached out to global LPs so far. As of now, this fund is going to be purely Indian LPs, but we are getting lot of interest from global LPs, we are considering them as well. We will just do the first close with Indian institutions, and then decide whether we want to take the foreign money,” Gupta added.

The sector-agnostic fund plans to make 20 investments from the third fund over a three-year investment period. The second fund has been fully deployed.

The company typically invests in Series A start-ups with an average ticket size of Rs 30 crore. In Series B and above, it co-invests in follow-on rounds in its portfolio companies. About 20 per cent of the third fund will be earmarked for follow-on investments.

Most of the deals are sourced from its strong alumni network. As a result, about 60-70 per cent of IvyCap’s portfolio companies are founded by IIT graduates.

The fund has a 5000-member strong mentor trust, a core of which is members from IITs. It assigns two mentors to each portfolio who would work close with the start-up on strategy, coaching, capacity building, business development, and operations.

On every Series A bet it makes, the company takes 1 per cent stake for the mentor trust and 1 per cent for the specific mentors assigned to these companies, over and above its stake.

Founded by Gupta in 2011, IvyCap raised its first fund of Rs 240 crore in 2012, invested in 10 companies. It made 23 bets from Rs 535 crore second fund.

The company has clocked five exits so far from Fund I. Sokrati, Aujas, Leixir, and Pharmarack are its full exits. One of its investments, online beauty marketplace Purplle, became a dragon, giving it a 22x returns. In VC parlance, a dragon is a portfolio company that returns the entire fund. Making a partial exit from Purplle early this year, IvyCap received Rs 330 crore against Rs 15 crore of initial investment in 2015. The company still continues to be a shareholder in the Mumbai-based start-up through its Fund II investment.

“Purple gave us 1.35x of our entire fund. On the four exits that we’ve done from Fund I, we have already got 2x returns of the entire fund. And of the remaining six companies, if I add up all that, we are somewhere around 3.7x or close to 4x,” he said.

Gupta claimed the fund has generated a DPI (Distributions to Paid-in Capital) of 2x multiple of invested capital of the first fund and returned 15 per cent of the principal of the second fund so far.

“The first two funds were proofs of our model. Our model can absorb much capital. We are slowly scaling up. The alumni ecosystem is so vast that there are a lot of data points that tell why this model makes sense. Our platform has started showing real value now. In that sense, an Rs 1000 crore fund is only a next step in our journey and it will definitely scale up further from here,” he added.