Elevation Capital, an early-stage venture capital firm, has raised $400 million in a new fund which will be dedicated solely towards late-stage investments as the investor doubles down on the India opportunity and looks to back new-age companies that have several years of compounding growth ahead of them.
Elevation Holdings will write $20-50 million cheques and focus on new-age companies that are close to a public market listing. It will continue to stay invested in these firms even after their IPO.
“We believe a partner like us who has a venture DNA, and who can actually be very patient, very long term, is what founders also seek at that (pre-IPO) stage, because then more and more of your investors are hedge funds, mutual funds, who are rotating in and out,” Mukul Arora, Co-Managing Partner at Elevation told Moneycontrol in an interview.
“At that stage, as a founder, you need investors who can work with you and think on similar time horizons as you are thinking about your business and the journey ahead. We will provide that permanent capital”
Despite entering at a much later stage in the life of a business, Elevation believes the opportunity to earn outsized returns by betting on new-age companies remains ripe.
Arora said that India as a country has a lot of economic growth and per capita income growth still ahead of it. Elevation’s view is that there is multi-decadal compounding that will continue to happen for many of the late-stage companies.
“Some new-age companies will compound like HDFC, Asian Paints, Titan and others. Most importantly, many of the new-age companies are still run by fairly young, very ambitious founders. So the founders who are still in their mid 30s, early 40s, have decades of runway ahead of them,” Arora said in the interview.
Elevation Capital, a backer of several late-stage companies like Acko, BookMyShow, Meesho, Paytm, Swiggy and several others, will aim to do just 2-4 deals a year via Elevation Holdings.
In its first-ever late stage deal, Elevation Holdings participated in Spinny’s $170 million fundraise earlier this year. It is also assessing other deals currently.
“We are aiming to be very, very selective with this fund, and hopefully be able to pick the right ones to partner with, pick the right ones to deliver very attractive returns,” Mridul Arora, Partner, Elevation Capital, said in the interview.
While Elevation Holdings will be open to doubling down on existing bets, it will also invest “in companies we have missed from our core fund.”
No change in DNA
Despite making moves to try a new style of investing, the VC fund’s Partners said the move should only be seen as an evolution of the ecosystem and not, in any way, a change in Elevation’s DNA.
“Our core has been and will always be Seed and Series A investing. All of us fully realise our ability to invest in companies at this later stage, through Elevation Holdings, has come because we have done well with our core fund. That is what gives us the right to play and win here,” Mridul Arora said.
In fact, a significant portion of Elevation Capital’s limited partners (LPs) have returned to invest in Elevation Holdings, in a sign of increasing conviction, he added. The two investing arms will continue to co-exist.
However, the structure at Elevation Holdings will be a lot more flexible, like longer holding periods, when compared with the early-stage VC fund.
Elevation also believes the approach will help the investor take more ambitious bets and generate outsized returns which will help it raise successive funds over the years under Elevation Holdings.
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