The Hindu Business Line | Vertex Ventures looks to diversify across sectors

This is adapted from The Hindu Business Line.

Vertex Ventures Southeast Asia and India is looking to diversify its investments in India by increasing the number of deals as well as entering new segments.

Till date, Vertex Ventures has raised five funds, the latest one worth $541 million last year against its target of $450 million. The VC firm also has a presence in the US, China, and Israel. It has so far invested in companies such as Licious, Kuku FM, and Nium, and is a former investor of FirstCry.

“With every successive fund, we are becoming bullish on India,” Kanika Mayar, Partner at Vertex Ventures, told businessline

Vertex Ventures Southeast Asia and India is one of the six major funds in Vertex’s global network of venture capital funds, where the anchor investor is Vertex Holdings — a wholly-owned subsidiary of Singapore’s Temasek Holdings.

“We have the flexibility to be well diversified across different sectors. As it turns out, India has been becoming very interesting, both from a macro perspective as well as what’s happening in the tech and VC ecosystem. We do believe we will be deploying more in India,” said Kanika Mayar.

Investment thesis

Till now, Vertex Ventures in India has been deploying in India since 2013-14, the VC has been focused on four segments for startup investments—consumer tech, fintech, software-as-a-service (SaaS), and healthtech. It now also wants to invest in segments such as mobility, sustainability, and clean energy.

“The sectors we focus on are consumer which includes both consumer technology as well as brands, software, which includes SaaS but also software for India and third sector is FinTech or financial services,” said Mayar.

Mayar noted that from 2020 onwards, they have been seeing interesting tailwinds. The sectors are healthcare, mobility and sustainability, which includes consumption, sustainability, as well as production or supply chains and agriculture.

The VC firm looks at building scalable businesses with strong unit economics, scalability and with exits in sight. It will increase the number of startup investments from the earlier average of three to four per year to around five to seven annually.

“We are bullish in India because of high-quality founders, deep scalability, and potential to build large profitable companies, and excitability,” said Mayar.

The firm wants to stick to pre-Series A and Series A investment stages, with ticket sizes in the range of $4-6 million in each company. Mayar says through the fifth fund, Vertex will now have the ability to do follow-on rounds in select startups.

“With the larger fund, we’re also looking to deploy slightly larger cheque sizes for the first investment. We are more inclined to do more Series A and Series B transactions. We would start deploying at $3 million - $4 million as the first check, and we can do upto $10 million for the first check. We reserve substantial capital for follow-on investments as well,” said Mayar.

Exits

Mayar noted that exit or exit stability is one of the three pillars that the firm looks at while investing and IPO is one of the forms of exit that the VC looks for. It also looks at opportunistic exit opportunities which include both large-scale M&A.

“We’re always conscious about balancing our investment horizon with providing the right exit opportunity for our capital providers. We have learnt not only how to invest but also how to exit and this gives us more confidence that we should go more bullish in India,” says Mayar.

Vertex Ventures has also dedicated $50 million from its fifth fund to back women-led startups.

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