Early-stage investment firm, Anthill Ventures, is all set to enter the growth funding segment with the launch of its $130-150 million fund in partnership with a foreign private equity (PE) firm.
Currently, the $10 million early-stage fund focusses on seed and Pre-Series A rounds. It counts companies such as sports community provider, Rooter, and travel-tech, QuaQua, besides several others in its portfolio.
"That will give us a longer time to hold on to the equity because in the current fund, we typically like to exit in late B or an early C round or during an acquisition, but now we can hold on a little bit longer... at least six years. Earlier, it was like a 3-4 years horizon," Prasad Vanga, founder and CEO of Anthill Ventures told Moneycontrol.
However, he declined to name the private equity investor that the fund proposes to partner with, given that the documents are yet to be signed.
According to experts, partnerships with PE funds help early-stage investors in getting access to quality limited partners, making it easier to raise money.
"We are more passionate about operationalising and scaling up companies, rather than just raising money. In the market too, we are not known as guys who just give money. We are basically more interested to come in and provide marketing strategy, scale and distribution support," Vanga said.
Expected to be launched by April, the fund will focus on media, urban lifestyle, healthcare and urban-tech. It will dedicate $50 million to India-based start-ups, while the rest will be open for start-ups from across the globe trying to address the Asia market or Asian companies that are trying to go global.
While a bunch of growth-stage investment funds such as Sequoia and Kalaari with the launch of Surge and KStart have forayed in the early-stage segment in the last few years, not many have transitioned the other way round.
This move by Anthill is unprecedented and is likely to cater to the gap witnessed by start-ups in Series B and C stages in India.
According to Vanga, all venture capital (VC) funds need to focus on multiple stages of financing if they want to make a larger value of what they have invested.
The growth fund also plans to invest a good chunk of the corpus in its portfolio companies from the early-stage fund, adding a layer of comfort to the existing companies. Anthill's early-stage fund has so far deployed $2.5 million across 16 start-ups and plans to exhaust the corpus by mid-2022.
The biggest concern for entrepreneurs is to raise money while scaling up. In a bid to acquire market share, most start-ups, especially in the consumer facing space, need to burn a lot of money.
While larger venture capital firms want to ensure that the companies come to them at a certain stage, angels or seed investors can only hand out the first two cheques. The third and fourth cheques are usually phases, which are wide open in the Indian market and it is here that Anthill's new fund can make a dent.
Nupur Garg, investor, independent director and founder of non-profit initiative, WinPe, told Moneycontrol: "If you look at the VC landscape in India, the early-stage ecosystem has developed very well in recent years with a number of KG strong fund managers and the availability of adequate and high quality capital. In contrast, there is paucity of capital as start-ups begin to scale and move into what is called the late venture capital stage. There exists tremendous opportunity for smart investors to tap into these start-ups that are poised to grow." It is precisely the area that has interested Anthill Ventures.