Artha Venture Fund closes debut micro VC fund at Rs 220 crore

Early stage investor Artha Venture Fund said on June 4 that it has closed its debut early stage fund of Rs 220 crore, which plans to invest in 28 promising startups in the next two years.

Artha, founded by angel investor Anirudh Damani has been raising the fund since 2018, and its closure indicates the growing demand for venture capital of all sizes for Indian entrepreneurs.

Investors in the fund include high net worth individuals who invested between Rs 2-5 crore and family offices that have invested Rs 5-15 crore apiece. Other backers of the fund include Artha India Ventures, the family office of Ashok Kumar Damani and Ramesh M Damani, and Singularity Ventures, the family office of Madhusudan Kela who formerly served as a chief investment strategist at Reliance Capital.

“The family offices serve a key role. Many of them can do follow-on rounds in our companies and we get a lot of deal flow by references from these offices,” founder and managing partner Damani told Moneycontrol.

Damani’s angel investments include hotelier Oyo Rooms, software firm Exotel and makeup brand Purplle. The fund’s prominent investments include space tech startup Agnikul, peer-to-peer lending firm LenDenClub, and vending machine startup Daalchini. Artha's portfolio currently has an annual revenue run rate of Rs 150 crore, Damani said.

From the first fund, Artha plans to invest in 40 companies, of which 12 are done and five are in the pipeline. The firm generally invests Rs 1.5-3 crore as its first cheque for 15% in a startup and invests Rs 4 crore and 8 crore more in the following rounds if the company is promising.

About 65-70% of its total fund will be invested in 10 of the best 40 companies, doubling down on its winners.

“The effect of the two pandemic-led lockdowns shook our portfolio founders and our team. However, each one stuck to their task, and our founders responded to each obstacle as an opportunity. As a result, our portfolio-wide revenues grew 3x in 12 months without raising additional capital. This frugal but explosive growth is what excites us and our investors,” Damani said. 

Artha’s stage of seed investing has also become increasingly competitive as founder-turned angels, micro VCs, angel networks, and accelerators all want to get into the hottest startups as early as possible. Another micro fund WEH Ventures said earlier this week that it plans to raise a Rs 100 crore second fund.

However this also means that some of these accelerators work in tandem with funds, become a feeder for them, and micro VCs become a feeder for larger well-heeled venture funds. The Indian startup ecosystem is going through an unprecedented funding boom, but Damani said at Artha’s stage of investing, deals still don’t seem too expensive, and have stayed at roughly the same rate for the last couple of years. 

“We will continue to scout for seed-stage deals in our preferred investment themes of direct to consumer (D2C), D2C enablers, and business-to-business (B2B). Another sleeping giant that has piqued our interest in the last 12 months is the gaming sector, especially for the masses,” Damani said.