VCCircle: December 2, 2014
In a sign of the growing interest of large institutions in early stage investing, Religare Global Asset Management (RGAM), the asset management division of Religare Enterprises, has acquired a 26 per cent stake in the general partnership (GP) of early-stage fund YourNest Angel Fund.
With this deal, YourNest Angel Fund will become an affiliate of RGAM, a global multi-boutique asset management company out of India with more than $20 billion in assets under management (AUM).
Delhi-based YourNest Angel Fund is a SEBI registered venture capital fund with a target corpus of Rs 100 crore, and it has built up a portfolio of about half a dozen startups.
So far, the fund has raised about Rs 35 crore for its maiden fund from over 55 high net-worth individuals, besides SIDBI (Small Industries Development Bank of India) as an institutional investor.
It’s not rare for large institutional investors to acquire a stake in the GP of private equity and venture capital firms. As this is a common trend in the global markets, there are not many known deals involving classic Indian GPs.
For instance, Kedaara Capital Advisors Ltd, co-founded by Manish Kejriwal, the former head of the Indian unit of Temasek, teamed up with CD&R (Clayton, Dubilier & Rice) where the bulge-bracket firm picked up a stake in Kedaara. Earlier in 2011, Pravi Capital set up by three ICICI Venture executives, formed a joint venture with ASK Group, which has a presence in wealth management and realty funds, to form ASK Pravi Capital Advisors.
Most entrepreneur fund managers in India have kept the GP ownership to themselves till now, while the GPs managed by institutions like ICICI Bank, the Tatas and the Birlas are unlikely to sell stake in the near future.
RGAM’s investment in YourNest will provide the early stage fund a global institutional backing which can be leveraged for fundraising, while RGAM, in turn, will get access to India’s vibrant early stage funding ecosystem.
“We have partnered with the best in breed asset managers in various alternative asset classes in India and outside,” said Shachindra Nath, Group CEO, Religare Enterprises.
Early this year, RGAM seeded five new funds across private and public equities like ValueQuest Capital, Religare Credit Advisors, Religare Comtrade Ltd, Healthcare Rental Yield fund and Agro fund.
RGAM, also holds controlling equity interests in two large US-based limited partners — Landmark Partners (a PE and real estate fund-of-funds asset manager focused on secondary transactions) and Northgate Capital (an asset management firm with significant exposure to some of the high profile PE and VC funds across the globe).
“The portfolio companies of YourNest can also work with the investee funds of NorthGate Capital to explore synergies. Similarly, NorthGate can leverage YourNest to deepen its India presence. It’s a partnership for a long term,” added Nath. NorthGate Capital, which runs a VC fund-of-funds practice besides making direct investments, manages about $4.2 billion in assets under management. Its VC partner funds include Accel, GreyLock Partners, Sequoia Capital, Matrix with exposure to companies like eBay, Groupon, Netscape, Twitter, Yahoo and PayPal. Under its direct investments practice, it has invested in companies like Yelp, Bloom Energy and Palo Alto Networks.
“We are extremely thrilled to partner with RGAM. We have found a great partner with them,” said Sunil K Goyal, founder and CEO, YourNest Angel Fund, a fund he conceptualised and founded in 2011. Prior to this, Goyal has held senior strategic positions in Airtel, Beetel & Airtel Africa.
Goyal is confident that their fundraising exercise will be a lot more easier, riding high on the institutional reach of RGAM. “We are confident that we would be able to raise the remaining corpus by early next year,” added Goyal.
“Our wealth management platform tells us that there are so many families and individuals who want an exposure to early stage investments in tech startups that offer a possibility of good returns,” said Nath.
Besides fundraising, YourNest is also keen to enhance its experiences and knowledge drawn from NorthGate Capital. “We are keen to learn from NorthGate’s experiences in other parts of the world like Israel and the US,” added Goyal.
Besides Goyal, YourNest also has two other c-founders – Sanjay Pande and Girish Shivani. Pande has over 20 years of experience across diverse fields, including education, healthcare, hospitality, FMCG, social entrepreneurship and consulting. Shivani has cross-functional exposure across multiple domains, including financial markets, operations of PE/VC funds, legal frameworks and deal syndication.
YourNest portfolio includes Proof of Performance Data Services Pvt Ltd, an aggregator of metrics for the out-of-home advertising ecosystem, Just for Kids Services Pvt Ltd, owner of the information platform for kids mycity4kids.com, and Liveminds Solutions Pvt Ltd, which runs BookMyCab, an online/tele-booking of cabs, among others.
“All our portfolio companies are showing significant traction. Early stage funding requires huge operational engagement and our USP is that we have had three partners since inception to provide for that operational bandwidth. We will make 3-4 investments in technology companies per year,” said Goyal.
He added that they are sitting on a very healthy pipeline and that they have already identified some 45 early stage companies to choose from. “We believe that there has been a significant value created by first generation entrepreneurs in recent years energising early stage opportunities. About 80% of the early stage deals are in $2M range,” said Pande.
This partnership underlines the fact that early stage investment has come of age in India. The early stage investments that have heaped great returns for Indian investors include redBus, Just Dial, Makemytrip, Mu Sigma, Naukri and InMobi. “Early stage investments in a tech start-ups offer possibilities of 5x-25x return that cannot be matched by realty funds or private equity,” added Pande.
Consequently, the early stage investment activity is seeing huge momentum. A few home-grown venture capital firms, which have raised money from ultra high net-worth individuals and institutions include Blume Ventures, Kae Capital, YourNest Angel Fund, Ivy-Cap Ventures and India Quotient Fund.
When asked whether RGAM would be open to backing some of these funds as they raise their follow-on funds, Nath said, “As a philosophy, we don’t create a competing affiliate.”