PeerCapital raises Rs 300 crore for first fund, adding to early-stage VC dry powder

From left to right PeerCapital Managing Partners Rohit MA, Karthik Prabhakar and Ankur Pahwa

Venture capital (VC) firm PeerCapital has got commitments of Rs 300 crore from Limited Partners (LPs) for its maiden fund, as the early-stage investor, which has backed six startups including Twitter’s India rival Koo, adds to the VC “dry powder” amid a funding slowdown.

Dry powder is industryspeak for the capital raised by VC and private equity companies that is not deployed.

The fund, which marked the first close in mid-2022, will have a corpus of Rs 600 crore, or about $75 million, managing partner Karthik Prabhakar told Moneycontrol in a virtual interaction.

PeerCapital has also kept a green shoe option of about Rs 300 crore, Prabhakar said. The VC expects to mark the final close of the fund by the end of this year.

The first close is a landmark for a venture capital firm, beyond which the company starts deploying capital.

Prabhakar, Ankur Pahwa and Rohit MA, the three managing partners, set up at PeerCapital in late 2022.

Most of its LPs are founders of tech and non-tech companies, family offices and high networth individuals. They will also target institutional investors in future, he said.

Prabhakar was a VC investor for more than 11 years and was the managing director of one of India’s most popular homegrown VC firms--Chiratae Ventues--in his last stint.

Rohit MA is the founder and managing director of Cloudnine hospitals and Pahwa was a former partner and national leader of e-commerce and consumer internet at EY India.

“The whole ethos that we are trying to inculcate and demonstrate is that we want to be on the side of the founders. This also means that our investors also understand that. If the founders win, we win and therefore our investors will also win,” Prabhakar said.

“Apart from this, for the founders, the ethos is how we can leverage the expertise of our LPs and how we enable founders in their journey. So we have named it as PeerCapital to in a way tell founders that we are your peers, from a founders’ perspective.”

Prabhakar said the firm would look to invest in about 30 companies with the cheque size ranging from $500,000 to $2 million, with a focus on seed and Series A rounds. It would also keep a reserve for follow-on investments, he said.

Investment plan

The venture capital firm will target consumer internet sectors such as e-commerce and marketplaces, gaming, creators economy and also focus on health tech, but largely on the digital side and not on offline delivery, Prabhakar said.

The firm would also look at investing in SaaS (software-as-a-service), B2B (business-to-business) commerce and fintech on the credit side, Prabhakar said.

PeerCapital joins a growing list of VC firms to raise India-dedicated capital at a time when the country’s startup ecosystem is experiencing a worsening funding winter.

Earlier this month, Moneycontrol reported how startup funding fell to a five-year low in January, with some of the most aggressive startup investors, including Tiger Global and SoftBank, making no investments.

According to Moneycontrol estimates, VC and private equity (PE) firms have raised nearly $10 billion since 2022. Investors, however, feel that capital deployment will only pick up later this year or in 2024.

“The market is not the best of the markets. If we were raising this capital in 2021, I would say that we would have closed this fund in a jiffy but the markets have changed. But we also believe that this is a very long-term game and people who are investing in the early-stage ecosystem, either in funds or directly are playing in the long-term,” Prabhakar said.

People they are meeting say this is the best time to enter. “Because even the underlying portfolio we enter today, it will not be at a sky-high valuation,” he said. In the past, too, the funds or startups that started in tough times grew well because “you are starting at a time where there is resource constraint”, Prabhakar added.