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IAN launches second early-stage fund with a Rs 1000-crore corpus

Early stage investing platform Indian Angel Network (IAN) on Thursday launched its second fund, IAN Alpha Fund, with a fund corpus of Rs 1000 (about $120 million) crore, more than double the size of its first fund of Rs 375 crore that it closed in 2019.

According to Alpha Fund’s Investment Committee member Saurabh Srivastava, the fund will have a base investment corpus of about Rs 650 crores (about $78 million) with an additional investment option of Rs 350 crore (about $42 million).

The Alpha Fund will be led by IAN’s senior managing partner, Padmaja Ruparel, and managing partners Jaideep Mehta and Vinod Keni. Mehta was previously the chief executive officer at HT Media -owned Mosaic Media Ventures, which publishes VCCircle. Keni is an accredited investor.

IAN expects the fund’s first close in December or January at about Rs 350 crores, while the Alpha Fund is likely to wrap its final close in about 18 months from the first, Ruparel told VCCircle.

The Fund will have an investment timeline of about 8 years, with an extension of up to two years.

The fund is only looking to invest at an early and seed funding stage. It is not considering Series B stage of funding except for its own fund’s winners, Srivastava added.

The Fund’s investments shall be divided into three categories, or buckets. The first bucket will include joint investments with angels, with IAN’s average cheque size at about Rs 1.2 crore ($0.14 million). The second category includes top-up investments in firms where IAN has invested previously, while the third bucket shall comprise investments beyond its portfolio, with participation from other investors.

With the cheque sizes earmarked for their investee companies, Ruparel said IAN’s Alpha Fund expects investments in about 100 companies– about 70 companies in the first bucket, and about 25 to 30 in the other two.

The fund said its cheque sizes will likely range from $1- 5 million, along with co-investors. Ruparel said the fund is looking at larger cheque sizes as a long list of captive investors may not be “the best use of management time,” thus, focusing on a similar number of investee companies as Fund I, however, with a larger quantum of investment.

According to IAN’s Srivastava, Alpha Fund will focus on founders proposing to solve “real problems” relevant to the Indian market, however, remaining sector-agnostic. This will include sectors across but not limited to cleantech, healthtech, agritech, edutech, fintech, and emerging sectors.

The Alpha Fund is aligned with IAN’s plans to invest in 500 startups with a Rs 5000-crore corpus, and will be aimed at creating nearly 50,000 jobs.

The fund will also focus on governance and compliance by startup founders, with IAN’s Sunil Munjal, Kris Gopalakrishnan and CP Gurnani spearheading the agenda.

The IAN Fund I, launched in 2017, invested in about 72 companies. While the fund’s investments have been completed, it is yet to exit from all the firms, Srivastava said. “The exits are still happening. 67% of the capital deployed has seen value creation with next rounds happening,” Ruparel said. The first fund’s internal rate of return is roughly at 50%, she said, adding the investment has leveraged about Rs 2,800 crores.

Some of IAN’s portfolio investments include Coolberg, FarmersFZ, SmartVizX, Druva Software, Uniphore, among others.