Impact investment firm Unitus Seed Fund has already struck four deals from its second fund even though the new fund is yet to mark its first close, a top company executive told VCCircle.
“Besides the four investments, one more deal is at the term sheet stage,” said Will Poole, co-founder and managing partner, Unitus Seed Fund. Two of these companies are in the education space, and one each in healthcare and fin-tech sectors, he added, without identifying any of the firms.
The new portfolio firms are currently warehoused by Unitus’ parent Capria, which manages multiple investment funds and a global network of impact fund managers.
Unitus Seed Fund II, which is eyeing a total corpus of Rs 300 crore, was targeting to raise Rs 150 crore to mark its first close this August. However, the first close has got delayed.
First close is an important milestone in capital-raising activity, after which a fund formally starts deploying capital.
Poole said the delay in reaching the first close was because the fund has been waiting for a large global investor. “Like other funds, we will go faster after we reach first close. You will see why we have waited. Sometimes we have to wait till we get the right investors to the table,” he added.
Unitus Seed Fund’s first fund, which had mobilised $23 million, invested in 23 companies and currently has 14 active portfolio firms. The bulk of the investment from the first fund was made in education and healthcare firms, and the approach for the second fund is expected to be similar. The fund also invested in financial technology, retail and e-commerce, mobile and consumer, and agriculture sectors.
The second fund is also expected to make investments in portfolio firms from the first fund. “Yes, follow-on funding is a core part of our strategy because we have a favourable survival rate. We will have a number of companies who will have exhausted their funds and who will be able to get access,” said Poole.
Impact investment market
Poole expects funds to continue to flow for impact investments.
According to a report by consulting firm McKinsey, impact funds invested over $1 billion (around Rs 6,400 crore) in India for the second consecutive year in 2016, helped by a jump in the average deal size even as the number of deals remained flat.
Impact investments are also being validated by conventional VCs, as they are putting in money in companies nurtured by impact funds.
Following seed funding by Unitus Seed Fund, 10 of its portfolio firms raised Series A capital and two raised Series B funding, as per its annual report 2016. The companies that raised Series A funding include UE Lifesciences, Milaap, GoCoop, Blowhorn and Curiositi, and the firms that raised Series B are Hippocampus and Cuemath.
“This shows that conventional VCs see good financial return opportunities from companies that impact funds invest in,” said Poole.
Unitus Seed Fund claims it has directly impacted over 1.2 million base of the economic pyramid (BoP) lives across 29 states in India, with 100% growth year on year.
Parallely, Capria is raising a $100-million fund with a greenshoe option of another $25 million to invest in impact funds investing in Latin America, Asia and Africa.
Its first close is expected in the first half of next year at $40-50 million, Poole said. The fund will raise money primarily from investors including family offices and foundations in Europe and the US. It is expecting Indian limited partners (LPs) as well, he added.
Capria has been investing out of its pilot fund, a small, $5.2-million fund. Some of its backers include former Infosys finance chief TV Mohandas Pai, Bill Gates Investments, Crystal Springs Foundation, The Lemelson Foundation, and Ranjan Pai.
The pilot fund, however, has only enough money to put into the general partner, the managing company of the fund’s partners, said Poole. Capria has made GP commitments to all 11 funds in the Capria Network. When it reaches the fund’s first close, it will invest up to $10 million as an LP in the partner fund. “The pilot fund investment process is ongoing and it will be augmented by the new fund in 2018,” Poole explained.
The 11 fund managers in the Capria Network include Unitus Seed Fund. Early this month, it added two fund managers investing in Africa and Latin America. Capria aims to add at least one more Indian fund manager in 2018, Poole said.
This article was originally published on VCCircle.