Vertex Ventures’ Kanika Mayar on India deal volume, new focus sectors and more

*This article is adapted from *VC Circle

Vertex Ventures, which is backed by Singapore state investment firm Temasek Holdings and closed its fifth India and Southeast Asia-focused fund at $541 million (about Rs 4500 crore) late last year, aims to not only increase the frequency of deals in India but also expand its focus sectors.

“Previously, we were managing four to five deals annually in India. With Fund V, we're increasing this to six to eight transactions per year,” Kanika Mayar, partner at Vertex Ventures South East Asia and India, told VCCircle.

Vertex Ventures Southeast Asia and India, part of Vertex Holdings' global fund network, is one of the biggest Southeast Asian-based VC investor with $5 billion in assets under management and approximately 200 active portfolio companies including online meat delivery unicorn Licious, audio content platform KukuFM and digital lending platform Kissht.

In a recent interaction, Kanika told VCCircle about Vertex's forthcoming investment strategy, including the new sectors and geographies the firm plans to target.

Can you elaborate on the changes in your India investment strategy?

We’ve expanded our India mandate significantly in terms of the number of deals we plan to pursue. Over the last two years, India has evolved into a more mature market, offering high-quality investment opportunities across a broad array of sectors. This growth has prompted us to broaden our strategy for India.

Our approach now includes investing in new sectors and executing more deals each year. On a more granular level, we are increasing focus on newer sectors where we've observed substantial growth potential, such as healthcare, mobility, and sustainability.

In these areas, we’ll begin with smaller investments to build our understanding of the business and scale up as we gain more insights.

How will Fund V reflect the broad changes you've introduced in your investment strategy?

In Fund V, we're placing a significant emphasis on sustainability, a new focus area that wasn't part of our previous funds.

Alongside this, our investment strategy in healthcare, which began with Fund IV, is also evolving. Initially, we concentrated on healthcare services, and with Fund V, we're transitioning towards healthcare technology.

This shift is driven by the emergence of numerous healthcare companies, particularly in response to the significant unmet needs highlighted during COVID. As these companies grow, there's an increasing demand for technology to bolster the healthcare ecosystem. This need extends beyond India, reaching other regions like the US, where there's a strong move towards value-based care and improved patient life cycle management.

Therefore, for Fund V, we're placing a strong emphasis on healthcare technology alongside healthcare services. We believe health-tech will be pivotal in shaping both the Indian and US markets in the coming years

How does Fund V's approach to deal-making in India differ from previous funds?

Previously, we were managing four to five deals annually in India. With Fund V, we're increasing this to six to eight transactions per year, with a focus on Series A and Series B investments. This means we're not only doing more deals but also deploying a larger portion of the fund in India. This represents a tangible shift, which will be evident through the increased number of deals announced by Vertex each year.

For India, we plan to execute around six to eight deals per year over the next three to four years, totalling approximately 25 to 30 investments. That’s our priority for now before we begin planning for Fund VI

How many deals are currently there in the pipeline?

We expect to close two to three more deals soon this year. These will be from a mix of new and old sectors

How will the introduction of new sectors affect your portfolio's sector allocation over the next two to three years?

Our three core sectors are consumer, SaaS, and fintech. Previously, we allocated about 60-70% of the fund to these areas. Moving forward, while we will continue to invest in these three, we plan to increase our allocation towards new sectors like healthcare, mobility, and sustainability. Over the next two to three years, we expect consumer, SaaS, and fintech to make up around 40-50% of our portfolio, with the new sectors gradually growing their share.

Which new geography are you targeting for Fund V?

Our core markets are India, Singapore, Vietnam, Thailand, Malaysia and Indonesia. For Fund V, we’re excited to explore a new region: Japan. This is the first time we’re incorporating Japan into our fund strategy.

Japan is appealing because of its technological advancement and high per capita incomes. We see an opportunity not only to invest in promising technology companies there but also to help these companies scale into our existing markets in Southeast Asia and India.

This aligns well with our global strategy. So, while our focus in Japan will be primarily on technology, we also aim to leverage these investments to expand their reach into other regions we cover

What is your preferred mode of exit for your investments?

An IPO is often the gold standard that founders aspire for, and it represents a successful exit for VCs. Achieving IPO scale is certainly exciting for us. However, it's not the only exit strategy we pursue. For instance, with FirstCry, we exited pre-IPO by capitalising on a compelling secondary opportunity rather than waiting for the IPO.

Our approach involves balancing fund timelines with exit opportunities and strategically taking money off the table when appropriate. We adopt a nuanced view of our portfolio, identifying potential candidates for IPOs while also considering options for M&A or secondary exits.

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