With its largest-ever fund of USD 60 million, the seed-stage venture fund plans to close around 15 deals with a total investment size of roughly USD 4.5 million per company.
Moving on to its third, much larger fund of USD 60 million, seed-stage venture fund Prime Ventures Partners is keen on tapping digital India and global SAAS technology startups, while keeping intact its stronghold in the fin-tech sector.
The company, which has startups such as Ezetap, Hackerearth, and Zipdial in its portfolio, plans to close around 15 deals with a total investment size of roughly USD 4.5 million per company.
The size of its previous fund was USD 46 million, which was again much larger that its first fund of USD 8 million. The company has made a total of 19 investments to date, and has seen just one exit – Zipdial – which was sold to Twitter.
Started by serial entrepreneurs Sanjay Swamy, Shripati Acharya, and Amit Somani in 2011, Prime Ventures has built a sharp focus on fin-tech over the years, given the founders’ deep knowledge of the sector. Fin-tech accounts for 35-40 percent of Prime Ventures’ portfolio of investments.
Amit Somani, however, in an interview to Moneycontrol, explained why the new-age seed-stage venture fund is not necessarily a fin-tech investor, but a prudent one, that strictly picks and chooses startups that solve real problems.
“No clones. That has been our strict policy since the start,” Somani said.
“We have a good portfolio in fin-tech, but we are sector agnostic, really. If we see a good business proposition in a company, if it is solving real problems, if their solution is 10x better than the existing solutions available in the market, if it has good unit economics, is scalable, we will consider it,” he added.
In fact, the company made zero investments in the fin-tech sector in 2017.
“We have more of fin-tech in our portfolio but it is not a strategy per se. We just happen to have expertise in the sector. We also believe that having a concentrated portfolio mitigates risk, doesn’t increase it. It gives us a broader understanding of new solutions,” Somani said. “We are opportunistic and flexible.”
But fin-tech continues to be a core focus area for the company still. “We want to go deeper in fin-tech. The sector has moved on, it is not just about payments anymore. Everything that a bank offers, can that be digitised? Can digital tech be used to provide better services? We will look at startups there.”
Global SAAS companies will be another focus area for Prime Ventures. “Companies such as HackerEarth and Tracxn, both on our portfolio, have built a product locally, but are distributing it globally through digital. That is going to be a big focus,” Somani said.
“We are keen on digital India startups as well. Startups that have solutions regarding digitisation of India, for both consumers and SMEs will be of our interest,” he added.
The next 10 years, according to Somani, will be the golden period for investments. He is excited about the opportunities that the Digital India initiative presents in particular.
“Mobile internet penetration has seen a huge jump in a very short span of time, thanks to falling tariffs and massive discounts. Such a situation is a breeding ground for innovation in digital services,” Somani said.
Such wasn’t the situation till a few years ago. “2015, for example, was a year of aberration. It was absolute mayhem,” he said.
Several startups Prime Ventures declined to fund were able to secure much higher funding, in millions of dollars, from other investors. This even prompted the management to think something was wrong in the way they were picking companies to invest in.
“There was a team of two IIT students, not yet graduated, who set up a company and were looking for funding. We had a good chat and we were interested. We asked them to come down and meet us. But apparently, we had an ultimatum of just two hours to decide whether to invest in them. There were other investors in the line, we were told,” Somani recalled.
The entrepreneur in question founded a food tech company that doesn’t exist today.
Distancing from no-bar-holds investment behaviour of that period, which sent valuations sky high, Prime Ventures has been selective in choosing the companies it wants to invest in.
“Thankfully, we have completely recovered from that madness. Valuations also are a bit more pragmatic, based on scale of the company, unit economics and so on,” Somani said.
“It’s a cyclical pattern that every market goes through. A boom is followed by a bust. It’s a repetitive cycle that Silicon Valley has suffered too,” he said.
Prime Ventures, however, has built the fund over a 10-year period and refuses to force an exit to create returns for its investors.
“We are looking for good investments, not opportunities to make a quick buck. We are confident we will earn our investors some money. Some will get acquired, some will not work, and that’s ok. We are in no hurry to exit. We are in it for long term. We are early stage so we need to give them time to grow,” Somani said.
