In the midst of one of the worst fundraising winters in recent memory for the third-largest start-up ecosystem in the world, domestic venture capital (VC) firm 3one4 Capital completed its fourth early-stage fund with $200 million.
The venture capital firm, which invests in unicorns including Open, Darwinbox, and Licious, had its fund oversubscribed by $250 million but decided to keep it at its original size, according to Pranav Pai, the firm’s founding partner, and chief investment officer.
Pai said that the venture capital firm’s success over the previous ten years allowed it to close the fund in two and a half months after its launch, despite sluggish market conditions. Prior to this, 3one4 Capital made investments through five different fund vehicles, three of which were devoted to early-stage investing. According to Pai, whereas Fund I returned 5x to investors, Fund II returned 6.5x.
When asked how it managed to get funds in the current environment, Paid responded, “It was absolutely tough.”
As an Indian VC firm, raising money has never been easy. However, because we have developed our relationships with our LPs (Limited Partners) directly, without the use of intermediaries like bankers and distribution placement agents, the LPs are familiar with us and have observed our methodical approach and our remarkably consistent performance over the years, which is an invaluable asset.
According to Pai, the bulk of 3one4 Capital’s current LPs made investments in the fund. 90% of the LPs, in his estimation, are institutional investors.
The newest fund for 3one4 Capital also marks the venture capitalist’s entry into GIFT IFSC (Gujarat International Finance Tech City), the country’s first IFSC.
Pai and Anurag Ramdasan, partners at 3one4 Capital, told Moneycontrol that with the fund, 3one4 Capital wants to invest in 30-35 firms with check sizes ranging from $500,000 to $6-7 million. The average cheque amount would range from $1.5 million to $3 million. The two added that 3one4 Capital had already invested a portion of its funds in more than five start-ups since the fund’s first closing in March 2023.
One of India’s leading domestic early-stage VC firms, 3one4 Capital, has supported more than 105 start-ups to date. According to the VC, the company would handle $510 million in committed money and over $750 million in assets under management (AUM) with Fund IV. The corporation claimed that the combined market capitalization of the firms in its portfolio exceeds $7.5 billion.
The previous 18 months have also been challenging for India’s start-up ecosystem, which is currently the third-largest in the world, as numerous start-ups, including some heavily funded ones, have come under pressure for alleged corporate governance issues. According to Pranav Pai, 3one4 Capital has assembled a team of specialists who work on corporate governance and reporting for 3one4 Capital as well as support its portfolio firms.
“Fraud exists everywhere, whether in the US, Germany, Japan, China, or anywhere else. India is not unique. But, in my opinion, the key is having the proper alignment, the right foundations from the beginning, and ongoing monitoring to help prevent errors, Pai continued.
