Avataar Venture Partners launches $350 million Fund II to back SaaS and B2B tech startups

Software-as-a-Service (SaaS)-focused growth stage fund Avataar Venture Partners has launched Fund II with a target size of up to $350 million.

The fund also had its first close with institutional investors from the US, Europe, and the Middle East.

Founded in 2019 by Mohan Kumar, Avataar raised two funds prior to the new launch. The fund house invests $10-50 million in companies with Annual Recurring Revenue (ARR) of $10 million and above and helps them scale beyond $100-150 million in ARR.

"In the current market environment, Avataar is uniquely positioned to invest in growth-stage SaaS and B2B Tech companies with $10-30 million  ARR. This is a great vintage to invest in SaaS - the unrealistic hype in the market is gone favouring founders with superior execution and profitable business models,” said Kumar.

Avataar’s portfolio includes some of India’s top global SaaS companies such as media software unicorn Amagi, India’s first SaaS IPO and global leader in travel & hospitality RateGain, and SaaS unicorn for wellness industry Zenoti.

The fund also focuses on B2B technology businesses serving the Indian market. For example, it is an early investor in ElasticRun, a unicorn that provides B2B eCommerce platform to reach rural India.

“The fund also has dedicated US-based operating partners who help the portfolio companies expand to global markets, develop a go-to-market strategy, hire global leadership teams, and proactively frame inorganic growth strategies to augment organic growth,” Kumar added.

The development also comes at a time when the SaaS market has been growing exponentially in India. According to a recent EY-CII report, the Indian SaaS market is expected to grow multi-fold by 2025 to account for almost 7% to 10% of the global SaaS market from the current 2% to 4%.

Several top venture capital firms have chosen SaaS as their preferred sector to invest in.  Industry data also reveals that about 70% of the 20 Indian unicorns in 2022 are B2B companies. Indian SaaS companies are considered by investors as the new ‘avatar’ of the IT Services industry – which generated $227 billion of revenue in FY22 and represent 15% of the Indian stock market.

Three out of nine Avataar companies are already past $100 million ARR/$1 billion gross merchandise value, with another three to four on track to hit the milestone in the next couple of years, Nishant Rao, founding partner and former operations chief of Freshworks, said.

Avataar announced its first fund at a size of $300 million in September of 2019 and the fund house is backed by HarbourVest, a US-headquartered private equity firm.