IIFL Sets Up Rs 1000 Cr Fund to Invest in Startups & VC funds
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IIFL Sets Up Rs 1000 Cr Fund to Invest in Startups & VC funds

26 Apr, 2017, 09:00 IST | Mumbai, India
Wealth manager IIFL Wealth Management is raising a fund of Rs 1,000 crore to be invested in startups and venture capital funds as high net worth Indians look to benefit from the exponential rise in startup activity in the country. The firm � a part of the Mumbai-based financial services company which also owns mid-market-focussed private equity firm India Alternatives and a slew of realty funds � has roped in a battery of stalwarts from the startup sector as it aims to be first-off-the block amongst peers who are also planning similar moves.

"It's an ecosystem that we cannot ignore," said Karan Bhagat, managing director of IIFL Wealth, who expects about 40% of the corpus to be invested directly in startups or as co-investments with other funds while 60% of the capital will be allocated for investment in venture funds.

"Their clientele, who are hearing a lot about startups, (get) access to part of the action while venture capital funds (can) raise money more quickly from HNIs (high net worth individuals)," said Aprameya Radhakrishna, cofounder of taxi aggregator TaxiForSure, who will join the investment board of the venture fund. Earlier this year, he sold his startup to market leader Ola in a deal estimated at Rs 1,250 crore.

Others who will join the initiative include Sandeep Tandon of online recharge platform FreeCharge (acquired by Snapdeal for Rs 2,800 crore) and Ashutosh Taparia of specialty women's healthcare company Famy Care (acquired by Mylan forRs 5,000 crore).


IIFL Wealth also plans to set up an incubation centre for startups and will invest Rs 25-50 crore in the fund itself which expects to make a first close by September.

This move to set up a startup fund by one of India's largest wealth management companies � which manages and advises over Rs 75,521 crore in assets � could set a precedent for other financial services players such as Edelweiss Financial Services which is also eyeing the sector. In May, the Mumbai firm roped in former hedge fund executive Pranav Parikh to lead its alternative funds business and launch a venture capital fund over the next few quarters. "We are seeing disruption in many traditional sectors, so it makes sense to have an exposure to the sector," said Parikh.

Technology investments have emerged as a favourite asset class for rich Indians. A recent report by Kotak Wealth Management estimates that 39% of those surveyed want to invest in technology venture capital funds while the number for real estate stood at 35%, financial services 23% and pharmaceuticals at 22%. Venture capital investments in India reached Rs 15,600 crore till June 2015, surpassing the total Rs 14,850 crore invested in entire 2014, setting the stage for another record year as interest in local technology startups peak.


Valuation of e-tailers such as Flipkart and Snapdeal have jumped 3-4 times in less than 12 months, outpacing market capitalisation of brick-and-mortar retailers like Future Retail and Shoppers Stop by miles. While most of these businesses are funded by foreign capital, potential returns which could be made are also attracting domestic capital primarily from HNIs.

Over half-a-dozen venture capital firms such as Orios Venture Partners, IDG Ventures India and Zodius Capital have managed to raise a significant amount of capital from domestic HNIs for their new funds over the past 12-15 months. For instance, Zodius raised Rs 320 crore of its Rs 700-crore fund from Indian investors and counted only one institutional investor on its roster, with the entire remaining capital coming from family offices.

"Few fund managers were willing to allow access to their venture capital funds and are very picky who they want to align themselves with," said George Mitra, CEO of Avendus Wealth Management, an investor in Zodius Capital. "Increasing number of VCs are now tapping domestic capital over the past few years."

Source: The Economic Times