Nandan Nilekani’s Fundamentum Partnership raises $227 million in second fund

Nandan Nilekani

Fundamentum Partnership, co-founded by Nandan Nilekani, one of India’s most-celebrated entrepreneurs and the co-founder and chairman of Infosys, has raised $227 million in its second fund for investing in early growth stage Indian startups, the company said in a statement on August 19.

Fundamentum will fund enterprises that have attained product-market fit and developed momentum in their scale up journey, the company said. The mid-stage venture capital and accelerator would lead or co-lead rounds of $25-40 million and would invest in about four to five startups each year, Fundamentum said.

Through the fund, Fundamentum will focus on tech-driven enterprises in the consumer internet and enterprise software space in India and would back entrepreneurs based out of the country, the company said.

“Digital acceleration, brought on by the pandemic, has dramatically increased technology spending across the world. India has all the ingredients in place—capital, entrepreneurs, stories of success, and liquidity. In this decade, we will see entrepreneurs making a material impact on the country at scale as the digital intensity of society increases," said Nilekani, co-founder and General Partner, Fundamentum Partnership.

The fundraise will now help Fundamentum to go deeper into its investment program, said Nilekani in a tweet.

Delighted to share that @FundamentumVC has launched its second fund, raised $227 million. We now intend to go deeper into our investment program, focus on entrepreneurs creating built-to-last companies out of India, and steadfastly support them in their exciting journeys!

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— Nandan Nilekani (@NandanNilekani) August 19, 2022

Founded in 2017 by Nilekani and Sanjeev Aggarwal, Fundamentum had launched its first fund of $100 million, which was deployed strategically in early growth stage startups. The company counts unicorns such as Pharmeasy and Spinny on its portfolio. Unicorns are companies with a valuation of more than $1 billion. Fundamentum claimed that post its initial investment, its portfolio companies have collectively raised over $1 billion in follow-on rounds.

“The second fund is significantly oversubscribed. We plan to continue the same strategy as used in Fund I – investing in tech driven enterprises from India,” said Aggarwal, Co-founder and General Partner.

“A strengthened team and focus on emerging sectors such as Bharat Apps, SaaS and Clean-tech, among others, will enable us to propel growth of our investee firms,” Aggarwal added.

According to data available on Tracxn, the company has made investments in as many as eight startups to date. Fundamentum also counts soonicorns or soon-to-be-unicorns such as FarEye, a provider of low-code delivery management solutions and Travel Triangle, an online marketplace for customised travel packages. Interestingly, the company had not made a single investment in 2021, a year that broke all records for private market funding in India.

Fundamentum joins a growing list of early-stage venture capital investors in India to have raised large funds for Indian-focused startups. Earlier this year, VC firms Accel and Elevation Capital had also closed their largest-ever India-focused funds.

Elevation Capital, which has backed the likes of Swiggy, Meesho, Paytm and Unacademy, had a fund for Indian startups with a corpus of $670 million. Accel, meanwhile, had raised its $650 million in a fund dedicated for Indian startups in March. 

The large fundraises have allayed fears of a looming funding winter for India’s startup ecosystem. Sequoia Capital India, a multi-stage investor, raised its largest-ever India and Southeast Asia focused fund of $2.85 billion in June. Out of the $2.85 billion, Sequoia will be investing as many as $2 billion into Indian startups, while the VC firm will be deploying $300 million from it for early-stage startups.

VC firms have seen their Indian tech portfolio companies growing exponentially in terms of valuation over the last decade, thanks to the acceleration of digital adoption and rising consumer incomes, just as Nilekani said. 

Another early and growth stage investor, Matrix Partners India, has written to the US Securities and Exchange Commission that it is looking to raise $450 million in its fourth India-focused funds. According to sources, Fireside Ventures, another homegrown early-stage VC fund that has backed unicorns like Mamaearth, is looking to raise $200 million in its second fund.

Moneycontrol had reported how early-stage investments in India had grown 28 percent in the first six months of 2022 to $1.50 billion, even as late-stage funding had fallen about 11 percent on year. In an interaction with Moneycontrol, Venky Harinarayan, co-founder of another early-stage investor Rocketship VC, had said that he expects valuations at early stages to get inflated in the next 3-6 months, with large-stage investors sitting on a lot of dry-powder.