From left to right: Karthik Reddy, Ashish Fafadia and Sanjay Nath, managing partners at Blume.
Blume Ventures, an early investor in startups such as Unacademy, Dunzo, Purplle and Spinny has hit the first close of its fourth venture capital fund at $105 million, allowing it to pursue new deals and cut larger cheques amid a historic funding boom.
Blume is looking to close the fund at about $200 million by March-April next year, managing partner Karthik Reddy told Moneycontrol, making it Blume’s largest fund so far, double its $105 million third fund from 2019.
“There is no precedent for the current environment. We have to be sensible but not conservative, which is also what we are telling our founders. We are trying to be thoughtful about it,” Reddy said.
He attributed the larger fund size to more money going into early-stage startups, which are needing more money to hire and retain talent, accelerate growth and chase new markets. A larger fund will also allow Blume to double down on its winners and go deeper in further funding rounds. Venture firms often see their returns dwindle compared to peers despite picking the right companies because they hold a lower stake, not having invested beyond one or two rounds.
From the new fund, Blume will continue investing in pre-seed to Pre Series A technology startups in sectors such as consumer internet, small and medium business marketplaces, as well as global opportunities in software & enterprise technology being addressed by Indian founders.
Blume’s fund reflects the new reality of larger early-stage funds, with Stellaris Venture Partners, 3one4 Capital, India Quotient and others increasing their fund sizes.
While VCs believe that the Indian technology market is throwing up opportunities like never before, Reddy acknowledged that investors have to separate the real valuations from those led by an aggressive funding environment, and that Blume is trying to build deeper conviction about various sectors than ever before, in an era of Fear Of Missing Out (FOMO) dealmaking.
Oddly enough, Blume is one of the few large early-stage funds yet to produce a unicorn in 2021- a year that has birthed nearly 40 startups valued at over a billion dollars so far. However this will change as its portfolio companies -- insurance firm Turtlemint and automotive startup Spinny -- are in talks to raise money at those valuations.
Investors in Blume’s funds (Limited Partners or LPs) include institutions, family offices and entrepreneurs, although it did not disclose names. “We are grateful to our existing anchor LPs for renewing their confidence and belief in Blume, with their strong and emphatic participation in our First Close. In addition to the overseas institutional investors, domestic wealth management platforms and family offices that have backed us, our LP base also includes unicorn operators and seasoned founders who mentor and advise our portfolio founders on critical challenges of building, scaling, hiring and growth,” said Ashish Fafadia, partner at Blume.Reddy is advising his portfolio companies to raise as much money as they can, but spend it carefully. He jokes that companies should raise a lot but be able to survive only on the interest earned from the capital in the bank, where the principal is not needed. “But capital gives you leeway to be more creative, to chase inorganic opportunities,” he said.