The company’s third fund attracted several international and domestic institutional investors including the likes of Old Mutual Wealth, Velo Partners, Finext, HDFC Holdings and SIDBI.
Several Indian entrepreneurs, including BookMyShow cofounder Ashish Hemrajani, Nazara Technologies’ Nitish Mittersain, Fractal Analytics’ Srikanth Velamakanni, MakeMyTrip’s Deep Kalra, and Jupiter’s Jitendra Gupta, and family offices of Infosys cofounder Kris Gopalakrishnan (Pratithi) and Hero Enterprise chairman Sunil Kant Munjal have also backed the fund.
Almost 60% of the total corpus raised by Kae for its latest fund is from domestic investors.
With the third fund, Kae Capital is expected to continue its pace of investments and fund about 25 early-stage startups over the next two years. It has already made close to 11 new investments through Fund III, including the likes of skincare brand Foxtale, analytics platform Hatica and gold loan provider Bold Finance.
Though sector agnostic, the fund will continue to be bullish about themes of software-as-a-service (SaaS), fintech, and direct-to-consumer (D2C) brands, Kae Capital’s founding and managing partner Sasha Mirchandani told ET in an interaction.
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In the past, Kae Capital has been the first institutional investor in several prominent startups including the likes of Tata 1MG, Zetwerk, Porter, Healthkart, Wysa, and Fynd, to name a few.
The final close of Kae Capital’s Fund III comes at a time when several early stage investors including the likes of Pi Ventures, Axilor Ventures, and Athera Venture Partners have all launched their latest funds, this year, and are working towards the final close.
It also coincides with the slowdown in overall investments in Indian startups due to global macroeconomic headwinds and fears of rising inflation, following a seminal year for fundraising for new-age technology businesses.
ETtech“Early stage has seen marginal corrections in terms of valuations,” Mirchandani told ET. “The difference between last year and this year is that you get more time for diligence, that is the key. Even follow-on cycles for companies have increased as investors are taking much more time on diligence. And they are looking at these companies from a responsible growth point of view,” he said.
Valuations for early-stage startups have corrected “at least by 20%”, Mirchandani said.
With the third fund, Kae will continue to back companies in the pre-seed to pre-Series A life stages, writing average cheque sizes of $1 million to $3 million.
This is a sizable growth compared to the firm’s first and second fund, where the average cheque size hovered between $500,000 to $1 million.
“That (cheque size) is a function of the market also, where seed cheques have gone bigger,” Mirchandani said. “Our success has been following our winners. So, we can go as high as Rs 50-60 crore in some of our companies. But very rarely do we do that.”
Almost 40% of the total corpus of Fund III is reserved for new bets with the rest to back these companies with follow-on capital, he added.
“We are asking our companies to have enough capital for the next 24 months because we believe that it is going to get worse before it gets better,” Mirchandani said. “So, companies which are well capitalised and have planned their businesses for a new world of slower growth and higher inflation will come out better because of much-prepared balance sheets.”
According to Venture Intelligence, startups saw overall funding slip to $2.7 billion in the September quarter as against close to $12 billion for the same period last year.
Early-stage investments also slipped to $576 million in the September-ending quarter this year compared to almost $958 million for the same period last year.
