3one4 Capital makes 58X returns on Darwinbox bet; Fund 1 returns capital to LPs

Not just 3one4 Capital, but Accel, Bessemer Venture Partners, Prime Venture Partners and several other VC funds are now preparing to deploy capital from a new fund.

Homegrown venture capital firm 3one4 Capital registered a Multiple on Invested Capital (MOIC) of 58X over seven years on its investment in HR tech SaaS firm Darwinbox and still continues to hold on to shares, Pranav Pai, founding partner and Chief Investment Officer at 3one4 Capital told Moneycontrol in an interview.

Simply put, MOIC is the total value of the investment, including all components, divided by the initial invested capital. The higher the number, the better the returns. Similarly, the VC fund has an internal rate of return (IRR) of 65.08 percent from the Darwinbox bet, also exceeding industry expectations.

This was part of the recent $140 million round that Darwinbox raised from Partners Group and KKR. 

IRR is the returns a VC fund generates by taking into consideration the time value of money.

Apart from Darwinbox, 3one4 Capital has also tasted success by betting on Tracxn (IPO exit), Licious (existing shareholder, unicorn), Pocket Aces (sold to Saregama), Wiom (sold shares in secondary transactions), DoSelect (acquired by Naukri.com), Wigzo (acquired by Shiprocket), Aereo (sold shares in secondary transactions), Jigsaw (acquired), Oust (acquired), and Loco (acquired), among others.

“For every dollar invested, our Fund 1 portfolio companies have raised $67 in follow-on funding. They have together raised $898 million across 80 rounds. It includes two unicorns, one IPO, six M&A exits, 11 profitable exits so far and four more profitable exits in the works,” Pai said in the interview.

Fund 1, which had a total corpus of Rs 100 crore ($16 million) has also returned all the capital and is on track to give an additional 4X, around Rs 400 crore, more as additional gains to its fund sponsors or limited partners (LPs).

A successful track record helps VC firms raise more funds and deploy more capital. Since its Fund 1 in 2016, the homegrown VC fund has five other funds which have only grown larger in size.

3one4 Capital has raised a new fund every 2-3 years and is likely to follow that strategy and raise its seventh fund in due course, Pai indicated.

Not just 3one4 Capital, but Accel, Bessemer Venture Partners, Prime Venture Partners and several other VC funds are now preparing to deploy capital from a new fund.

"The last 15 years, all the VCs said India will be a top three market and will be more developed – that is here now, so this is what it looks like. A lot more global investors are coming to India to invest here and scale homegrown companies. The India story doesn’t have to be sold anymore, everyone has seen the potential," Pai said when asked why VCs are raising new funds.