Bengaluru: Venture capital (VC) firm Lightbox, which has so far raised two India-focused funds and backed start-ups such as Faasos, Embibe, Furlenco and Droom, may raise a new fund next year after completing the last few investments from its current fund.
In an interview, Sandeep Murthy, partner at Lightbox, said that the VC firm is looking to complete investing from its current India fund, which has a corpus of more than $100 million, over the next 12-18 months, before launching the new fund.
“As far as our second fund goes, our intention is to invest in 8-10 companies—we’ve invested in five so far. So, if we make two-three more investments, we’ll be pretty close to where we want to be. We’ll have to think about what’s next then,” said Murthy.
“Assuming that we find two-three good opportunities and we feel we will consume our capital going forward, we’ll probably have to think about what the next fund will look like,” he added.
Lightbox does not plan to raise a much larger fund and Murthy indicated that the size of the next fund will be roughly similar to the VC firm’s existing two funds in India. The second fund that Lightbox raised in 2014 had an initial corpus of around $90-100 million and the next fund is expected to be of a similar size.
“We’re creatures of habit. We like the space we operate in and we feel that we add a lot of value here—I don’t think we’ll stray too far from what we’re currently doing,” said Murthy. Prior to Lightbox, he headed Sherpalo Ventures in India, which invested in start-ups such as ClearTrip, InMobi and InfoEdge.
Lightbox closed its second India fund at Rs600 crore in October 2014. In late 2016, Lightbox raised an add-on fund of $54 million to invest in its existing portfolio start-ups. Lightbox’s first ever fund in India called Lightbox Ventures I was used to buy out six portfolio companies that Murthy had invested in when he was working with Kleiner Perkins Caufield and Byers (KPCB) and Sherpalo Ventures.
“The first fund is a buyout of the companies that I had invested in over the previous eight years. Those companies are more mature. Our second fund is relatively early, as far as businesses go—they (the start-ups) are an average of two years old and we’re very much in the build phase. I’d say those are much more long-term and we’re happy with the way they are moving. We’ll continue to work with them, invest in them and grow them,” Murthy said.
Lightbox will focus on sectors such as fast-moving consumer goods, artificial intelligence, fintech and data analytics and continue with its strategy of making early-stage bets, typically at the Series A stage, he said.
“AI for AI sake is not interesting—AI in the application of something is really interesting… Our interest is in consumption—so (we want to be) wherever we see broken pieces in consumption,” Murthy said.
Over the past year, a number of leading VC firms have raised new funds, indicating that investors are still bullish on the potential of early-stage Indian start-ups. Last year, Sequoia Capital closed a $920 million fund to invest in early and late-stage ventures.
In December, VC firm Accel Partners, which over the years has backed high-profile technology start-ups, including Facebook Inc. and Flipkart, raised $450 million for its fifth India fund.
Experts say it’s relatively easier for the likes of Accel Partners and Sequoia Capital, which are based in the US, to raise new funds compared with so-called home-grown VCs such as Kalaari Capital, Nexus Venture Partners and Helion Venture Partners.
Over the past two years, VC firms have raised billions of dollars in new funds, fuelled by optimism of exits in the Indian start-up ecosystem. Over the next 12-18 months, that situation is likely to change.
Fund-raising in the VC industry is expected to get much tougher than in previous years, given the absence of major exits in recent years. Due to the lack of exits, a number of VC firms in India have struggled to return money to their limited partners and have been forced to seek extensions from investors.