The fund plans to deploy the capital by investing in four to five startups each year. Fundamentum, which typically backs startups in the Series B stage and beyond, will look to lead or co-lead $25 million to $40 million rounds, Aggarwal told TechCrunch in an interview.
Nilekani, co-founder of IT services giant Infosys and who has been instrumental in development and evangelising of several of India’s digital initiatives including biometric IDs Aadhaar, and Aggarwal, who founded now IBM-owned BPO firm Daksh, launched Fundamentum in 2019 to back consumer-focused and software-focused startups.
“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 in a statement.
“We are in the early stages of that journey. At Fundamentum, we tested the waters with the first fund. 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 journey.”
The firm, which has evaluated over 500 startups, has made half a dozen investments so far and its portfolio startups have collectively raised over $1 billion in follow on rounds, it said. Fundamentum’s portfolio includes unicorns online pharmacy Pharmeasy and car marketplace Spinny.
Fundamentum’s new fund is backed nearly entirely by Indian entrepreneurs, it said. “We feel the entrepreneurs’ capital is superior capital. It delivers money++,” Aggarwal said.
“Given that we all entrepreneurs, we do have that bias,” he added, without ruling out the possibility that Fundamentum may open up the fund to institutional investors in the future.
The world’s second largest internet market has seen the emergence of several local venture funds and also attracted scores of high-profile investors in the past 12 years. Sequoia, Accel and Lightspeed, all of which have also been investing in the South Asian market for over 10 years, announced new funds recently.
SoftBank, Alpha Wave Global and Tiger Global have also increased the pace of their investments in India in recent years. SoftBank invested over $3 billion in India last year alone. Tiger Global has invested $6.5 billion in the country to date, TechCrunch reported earlier.
Fundamentum’s new fund comes at a time when startups in India — and beyond — are finding it increasingly difficult to raise capital at terms considered favorable from last year’s bull cycle norm. Aggarwal said many reputed early-stage venture firms have closed new rounds in India in recent quarters, so there’s enough dry powder to continue to back young startups.
For growth stage startups, it’s a slightly different story. “The growth capital that used to come to India, that has sort of dried up,” he said. Aggarwal acknowledged the shift in the dynamics in the industry, saying valuation asks have corrected and deal flow has remained strong. “So you now have time to do more due diligence and invest at right prices,” he said.