Business-to-Business (B2B) Technical Assistance Fund II closed a $100 million top-up fund to invest in some of its portfolio companies, three years after closing its first $300 million fund. within two years after .
The second fund is expected to reach a final close of up to $400 million, founder and managing partner Mohan Kumar told ET.
“We usually try to support 10 to 15 companies in the fund and give them all the support. It explains the proposition behind the $10,000 fund,” said Kumar. “This fund could go up to $400 million, but not more. It’s not going to be a billion dollar fund because it can’t serve.
Avataar’s second fund has made its first close and already accounts for just over 50% of the total corpus, he added. The final closing is he scheduled by March 2023.
Over the next 30 months, we plan to deploy all capital from Fund II.
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Kumar, former partner at Norwest Venture Partners, and Nishant Rao, former Chief Operating Officer of Freshworks, a Chennai-based software as a service (SaaS) company, launched Avataar Venture Partners in 2019. . Global Fund of Funds as a Single Limited Partner or Sponsor.
In the second fund, the venture capital firm will back 10-15 new companies, write checks with an average size of $35-40 million, focus on growth-stage companies, and increase the investment pace. is expected to continue.
Expecting to complete three new investments from Fund II by mid-November, focused on companies in the B2B technology enablement space across healthcare, urban mobility, agritech, deeptech, blockchain and DevOps .
“We are a B2B fund and SaaS is a big part of our focus. Ideally we join when the company has $15 million in annual revenue. Between $10,000, there will be many startups entering the market to raise funds next year.Until then, we will see more opportunities in the B2B technology market, rather than SaaS, over the next year. SaaS will start recovering next year,” Kumar said of the investment opportunity.
Avataar previously launched the fund by acquiring stakes in six B2B SaaS companies (Appnomic, Capillary, CRMNext, ElasticRun, Manthan and Zenoti) from Norwest Venture Partners in a single portfolio transaction.
Regarding exits, Kumar said Avataar expects nearly seven of its portfolio companies to apply for listing within the next 24 months, with backing from the first fund.
“The M&A story in India is still weak today. If you look at acquisitions over $500 million, there are none today, whether by Indian companies or by global majors. IPO needs to be planned and exit is heavily dependent on IPO.To do an IPO in the Indian market you need to have good unit economics and B2B SaaS companies are preferred because they don’t have that much cash. Because we don’t consume it.”
RateGain Travel Technologies, an Avataar portfolio company, provides software for the hospitality industry that was listed on the Indian Stock Exchange last December.
Around the same time, Capillary Technologies, a retail customer relationship management (CRM) software provider that is part of Avataar’s portfolio, also submitted a draft prospectus.
Avataar’s second fund came at a time when global technology stocks crashed as markets reacted to inflationary pressures and high interest rates.
“The overall health of LPs depends on the public market and that has taken a hit. So even existing funds raising money there have had a lot of re-ups (or existing LPs joining) so 4 LPs signed the re-registration for the second fund We are up and running and introducing two new global LPs, and we have not yet set up a mechanism to receive money locally,” Kumar said.