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Exclusive | VC firm Stellaris plans to close second fund at $220 million

VC firm Stellaris is closing its second venture fund at $220 million, higher than originally planned, and signaling the startup funding boom underway in India. Stellaris' key investments include software firm Whatfix and consumer brand Mamaearth, where its stakes are worth over $150 million.

Mumbai / June 16, 2021 / 08:01 AM IST
Stellaris combined stakes in these two firms alone- it owns 12-15 percent in both- is worth over $150 million, more than its entire first fund.

Stellaris combined stakes in these two firms alone- it owns 12-15 percent in both- is worth over $150 million, more than its entire first fund.

Stellaris Venture Partners, an investor in startups such as consumer brand Mamaearth and software firm Whatfix, is planning to close its second fund at $210-220 million, significantly higher than the $150-160 million it had originally planned- signaling rising demand for VC money as India is in the middle of a startup and funding boom.

Stellaris declined to comment on Moneycontrol’s queries.

Stellaris, founded by three former partners of Helion Ventures- Ritesh Banglani, Alok Goyal and Rahul Chowdhri, counts software firms Cisco and Infosys as well as the World Bank’s International Finance Corporation (IFC) as its Limited Partners (LPs) or backers, among others.

After Helion was disbanded, Stellaris was founded in 2016 and raised a $90 million first fund in 2018. Its success has primarily been led by skincare and babycare brand Mamaearth along with Whatfix- which makes software onboarding for companies easier. Whatfix was recently valued at $600 in a SoftBank-led round, while Mamaearth is currently negotiating a fundraise valuing it at $700 million, according to sources and media reports.

Stellaris combined stakes in these two firms alone- it owns 12-15 percent in both- is worth over $150 million, more than its entire first fund. Its other potentially lucrative bets include software startup Slintel, healthcare firm MFine and logistics firm Loadshare. Slintel recently raised a $20 million Series A round led by GGV Capital, while MFine is currently raising $30-40 million.

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From its first fund, Stellaris had only one real bust- when content platform Manch- built along the lines of Reddit- shut down in early 2020. Another of its companies- social commerce firm Shop101 was acquired by InMobi-owned Glance for $30-35 million earlier this week.

“Ritesh, Rahul and Alok are a really high quality team and LPs really like they have been together for a decade. LPs like that kind of stability in fund managers, and they have performed well so far. They have been picking the right spaces and companies,” said an investor who has closely worked with them on deals, requesting anonymity.

“They had planned to raise a $150-160 million fund but as they spoke to more and more US-based LPs, they realised that allocation to India is increasing. They are also well-regarded by founders and co-investors, which is important. They are generally upfront about their terms and theses. That transparency helps,” said a founder who knows the firm, but hasn’t raised money from it, requesting anonymity.

A fund of over $200 million would put Stellaris closer to Accel, Matrix, Lightspeed and Nexus Venture Partners- experienced VCs and among India’s top investors who have raised the largest VC funds in India- only second to Sequoia Capital.

Accel and Nexus have both raised or are raising $450-500 million funds, while Matrix’s last fund was $300 million. Lightspeed India raised a $275 million India-dedicated fund, its third, last year. Moneycontrol reported on May 10 that Matrix is eyeing a $400 million fund this year

More than doubling its fund size also indicates Stellaris’ confidence that it can return over a billion dollars in cash over the next decade to its investors (LPs). LPs who invest in early stage venture funds generally expect a return of 4-5 times on their investment in a 7-10 year period.

Barring Accel- whose early bet on Flipkart paid off handsomely, and Nexus- whose software bets have consistently worked over the years, early stage VCs who set up shop in the late 2000s, have found it challenging to return funds. The Indian startup scene has generally been plagued by a lack of exits, although this is changing recently with both large acquisitions as well as upcoming public offerings for Zomato, Paytm and others.
M. Sriram
first published: Jun 16, 2021 08:01 am

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