8i Ventures is nearing the final close of its $50 million second fund on the back of a windfall from exiting its investment in M2P fintech, the top executive of the venture capital firm said.
Several large institutional investors, including GMO Fintech, a subsidiary of Japanese conglomerate GMO Internet Group, and the finance arm of TVS Credit, have agreed to participate in the Mumbai-based firm’s second fund, Vikram Chachra, founding partner of 8i Ventures, told Mint. He added that the firm is in final discussions with major banks, global corporations, and Indian and global family offices from the US and Europe.
Queries sent to GMO Fintech and TVS Credit did not elicit a response at the time of publishing the story.
“We’re in the final stages and should wrap it up in the coming months. Valuations have shrunk quite a bit, so we’re targeting $50 million but the final close could be anywhere between $40 to $60 million,” added Chachra.
8i Ventures achieved the first close of its second fund at $25 million in November 2022, largely from the Salgaocar and Kothari (DSP) family offices, which were also invested in 8i Venture’s first fund. The firm had initially aimed for a final close of the $50 million fund by March 2023, but this was delayed as it awaited commitments from new institutional investors, Chachra said. He said he expects it to close in two to three months.
Bonanza exit from M2P
The early-stage venture capital firm, which invested ₹9.7 crore in M2P Fintech in January 2020 from its first fund, clocked returns of almost ₹116 crore in just 4.5 years. The returns before tax were 1.27 times the entire corpus of Fund I, even after the company invested only about 10% of the first fund’s corpus.
“We had a chance to deliver a very high DPI (Distributions to Paid In Capital ratio). If we didn’t exit now, the next opportunity might have come through an IPO, which is another two to three years,” he said.
The software-as-a-service (SaaS) startup M2P Fintech raised ₹850 crore in a funding round led by Helios Investment Partners, in a mix of primary and secondary share sales in September.
Chachra said the firm believed this round helped it reward its investors with a hefty payout, potentially recycling the capital for the next fund.
“In our first fund, we took a small exit from M2P, which helped get the second fund going,” he said.
This comes when the LP community is prioritising actual cash returns as the key metric for evaluating VC funds, overshadowing high valuation markups, many of which stem from the 2021 funding boom.
Founded in 2019 by Chachra and Vishwanath V, the early-stage venture capital fund backs founders within fintech and consumer sectors. 8i Ventures launched its first fund in May 2019 and officially closed it in July 2021. The fund raised $15.5 million ( ₹130 crore at current exchange rates) – $13 million in managed assets and $2.5 million co-invested with partner firms.
In June 2022, 8i partially exited M2P Fintech, bringing down its stake along with that of co-investing partners to 3.7% from 4.5%. To be sure, 8i made a full exit from M2P in the current round. The company has investments active in Slice, Blue Tokai, Eazebuzz, and TransBnk, among others.
From its Fund 2 corpus, 8i Ventures started pre-seed investments through its newly launched Origami model in March this year. The aim of the model is to make quicker investments of smaller ticket sizes of between $250K to $2 million.
Chachra told Mint that 8i Ventures has reviewed about 600 startups in the initial phase of its investment programme. From this pool, the firm selected four startups to invest in.
The second round of the programme, which will be held twice a year, is scheduled to begin on 14 November.