Dear Investor,
I am writing this at a time when the world is sending mixed signals in almost every sphere: global uncertainties continue to make financial markets volatile, and geo-political shifts are adding to indecisions. Amidst all this, our economy is an exemplary beacon of hope with steady growth and inherent stability. Despite this, the funding winter impacting Indian startups remains unrelenting, and for several reasons, family offices have held back investments in this alternate asset class. While we always endeavour to regularly invest in and – exit from – high-potential startups, there has been an unforeseen delay in exits. This is not to say that we had no exit opportunities. Still, given the lower valuations being offered, we chose to patiently wait for the underlying portfolio companies to grow more robust and attract even higher valuations.
Consequently, we have seen nine startups within our portfolio shrug off the funding winter to raise subsequent rounds in this financial year – a testimony to the uniqueness of our investment thesis of partnering product innovations: Exponent Energy, WIOM, Dozee, Datamotive, CredRight, CronAI, Trezi, UptimeAI and Lightspeed Photonics. Each appealed to incoming investors for their strong business outlook and growth plans.
Although we closed YourNest Innovative Products VC Fund III at INR 5.04 bn against the target corpus of INR 5.5 bn because of the pullback by a few other LPs, we have over 55% funds in dry powder to invest in genuinely worthwhile DeepTech startups at attractive valuations. With two recent investments in Datoms and Aliste, our analysts still cherry-pick pitches; term sheets have also been issued to entrepreneurs in the space tech and geospatial tech domains. We are aiming for two or three Fund II exits in FY25; and with competing bids for three Fund I companies exhibiting hyper/profitable growth, we are gradually emerging from the funding winter.
The sector remains stable and attractive at a fundamental level: a CRISIL-Oister Report on AIFs released in Dec ’23 confirmed that Indian PE/VC funds have delivered higher returns than the benchmark Sensex over the past decade. The alpha across pooled IRR of 217 funds over the benchmark as of March ’23 stood at 13.5% per annum. The report also stated that the AIF market is poised for more growth. India is in an advantageous position with government policies and efforts providing a platform for commercial innovation and sustained infrastructural investments. These, along with rising entrepreneurship and a steadily increasing large consumer base, firmly support our startup ecosystem.
Compared to peer VC funds, YourNest remains a Top Quartile Fund house as per the CRISIL (an S&P affiliate) AIF Benchmark Report (March 2023). As of March ’23, Fund II ranked 6th among 29 peer funds with 35.2% Net IRR; the threshold for the top 25% funds was 32.8%. Similarly, Fund III ranked 17th among 69 peer funds with a Net IRR of 21.1% as of March ’23; the threshold for the top 25% funds was 17%.
The fiscal ending March ’24 has been one of both reflection and renewed strategisation: active funding and exit discussions have kept our team busy throughout the year, and more in-person meetings by our pan-India partners than ever before have led to a renewed confidence and commitment to outperform as a top-tier fundhouse continuously.
While I am sure you will follow us on X (formerly Twitter) and/or LinkedIn for regular updates, the YourNest team, our founders and I thank you again for your continued support.
Sunil K. Goyal
Managing Director & Fund Manager
February 06, 2024