ATF-II is awaiting approval from the Securities and Exchange Board of India (Sebi), and expects to close by September-end.
This comes as the eight-year-old fund – founded by former
cofounders Kris Gopalakrishnan and SD Shibulal, along with other senior technologists – has deployed 90% of its first fund (ATF-I) worth Rs 200 crore by backing almost 54 companies.
Axilor’s new fund comes at a time when
overall funding in Indian startups has dipped to $6.9 billion in the April to June period compared with $11 billion in the previous quarter. Further, global macroeconomic headwinds continue to hurt the investments and valuations of technology companies.
However, as late-stage investors take a cautionary approach towards investments and growth-stage funds continue to park capital for their existing portfolio,
early-stage investments have come forth as the sweet spot, as top-tier Indian venture capital (VC) firms rush to back startups early.
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ET
reported on July 5, that though funding for early-stage startups dipped marginally to $839 million in the April-June period, it continues to be 30% higher than the last quarter of 2021.
Axilor’s latest corpus is almost four-fold higher than its previous close, as the seed-backer looks to continue backing startups in areas of enterprise software-as-a-service (SaaS) working on specific vertical specialisations and supply-chain technologies, fintech, healthcare, and agritech.
It looks to deploy a large part of the latest fund towards business-to-business (B2B) software providers building for India and global markets.
Other cofounders in the fund include Tarun Khanna, Srinath Batni, and Ganapathy Venugopal.
“The first fund was about finding the product-market fit for us, where we were actively looking at business models and founders that aligned with our investment thesis. Now, for the next five years, we are seeing a $1-trillion digitisation opportunity,” said Venugopal, chief executive of Axilor Ventures.
On increasing the fund corpus, he said: “We are seeing global enterprise SaaS companies being built out of India, going after large global verticals such as BFSI, auto, steel. So these are interesting opportunities to build out $100-million ARR (annual run rate) companies.”
The deployment period of the new fund is expected to be over 12 years, as the seed-backer looks to recycle the capital through returns and exits, Venugopal added. “Almost 30% of the new fund will be allocated to support cross-over opportunities and portfolio companies from the previous funds,” he said.
However, the fund will continue its pace to back 10-12 companies every year, writing initial seed cheques between $750,000 to $1 million, and acquiring an average 10-12% stake in early-stage startups. Based on the performance, it will also look to write follow-on cheques worth $2-$3 million.
Axilor expects to back 100-125 new companies, with its second technology fund.
With the first fund, Axilor’s current portfolio includes restaurant-management platform UrbanPiper, which recently got the backing of Indian foodtech majors Swiggy and Zomato; digital-entertainment startup, PocketAces; fintechs Enkash and Vyapar and breast cancer screening solution Niramai.
Also, Axilor’s latest fundraise comes when several early-stage funds, including Elevation Capital, Athera Venture Partners (formerly Inventus Capital), and
, among others, have closed their latest funds and increased their corpus on the back of a record-breaking year for funding in Indian startups.
“The seed-to-Series A conversion is the hardest. While for the ecosystem, it is 18%, for Axilor, it is trending at 48%. Most tier-I funds have accelerated their fund allocation towards seed-to-early-stage opportunities. However, how the deployment progresses (for tier-I funds) will largely depend on how many of their portfolio companies move from seed to Series A and growth stages,” Venugopal commented on the increased competition among the early-stage backers.
Other VCs, too, have raised the ceiling for seed-stage investments in the recent past.
Sequoia –
which announced its mega $2.85-billion India and Southeast Asia fund in June – has decided to raise the ceiling to $3 million for its accelerator programme Surge, and Tiger Global has also started backing India’s early-stage startups.
