While the investment industry underwent a slump this year, there is one early-stage venture capital firm that has been investing silently and has created a rather large portfolio.
Over the last 18 months, Noida-based investment firm advantEdge Partners has invested in 18 startups, along with eight-follow on investments in its portfolio companies. advantEdge partners has co-invested with other investors such as Sequoia Capital, Lightspeed Venture Partners, 500 startups and IDG Ventures. The pace comes at a time when the total value of disclosed deals in the country has slumped to $1.5 billion so far this year from $4.2 billion in 2015.
advantEdge has also been co-investing with angel investors including Rajan Anandan, Binny Bansal and Kunal Bahl, among others.
"It became fashionable to start a VC firm, we didn't want to come out and talk about it until we had a good track record. In 18 months, we actually kept ourselves under the radar and built a portfolio. We were learning and understanding this space. We always felt the need to establish ourselves and built credibility and show some traction. Eighteen months was the time for relationship building," said Kunal Khattar, partner, advantEdge Partners.
Started in mid-2015, advantEdge has a built a portfolio of companies ranging from transportation to ed-tech sectors. It has invested in the companies such as internet media and news firm Scoopwhoop, enterprise marketing automation suite Wigzo, test preparation app OnlineTyari, bike taxi service provider Rapido and on-demand shuttle service provider Shuttl, among others. Apart from India, the VC firm has also made two investments in Singapore. It is in process closing a deal in US' Bay area soon.
Khattar says advantEdge has no sectoral preferences when it comes to picking a startup but there are sectors which advantEdge prefers to avoid. "We have avoided hyper-local sectors whether its food, medicine, groceries. We always felt that unit economics is a challenge. We have avoided the e-commerce B2C sector because of the high customer acquisition costs which are associated with it and low margins."
At the same time Khattar says there are sectors which advantEdge understands really well given the background of the team members and of the limited partners (LP) associated with the fund.
"There are areas that we understand really well including mobility, transportation, logistics etc. We are looking at a lot of connected car products and IoT (Internet of Things) devices. Transportation is an area we are very keen on as two our very large investments are in Shuttl and Rapido," he says.
advantEdge invests between $100K to $1 million per transaction, making seed investments as well as Series A investments.
"We are very flexible in terms of the cheque size. Our tendency is to come in early and pro-rate with every investment. We have participated in every subsequent round of funding in our portfolio companies," he says.
While exits are an Achilles Heel of the Indian investment industry, the investment firm has already exited two of its portfolio companies with "healthy returns". The VC firm is looking to invest in 12 more companies by December 2017.
"We have a target of how many opportunities to look at. We try to look at almost two-three companies in a day. Hopefully, we will continue to invest at the same pace that we are investing now," Khattar said.
Meanwhile, the VC firm has also launched a six-month long incubation programme for startups at its 10,000 sq. ft facility in Noida.
The incubation programme will have rolling admissions and it will invest up to Rs 15 lakh upfront in every startup in exchange of 5-8% equity. advantEdge has also tied up with IBM, Amazon, Zendesk and Razorpay to provide various services to startups.
"What we realised was that a very small percentage (10-12%) of startups are getting funded at the end of the programme. We don't expect significantly large startups to get funded but this number seemed pretty low to us. We have tried to build an incubator programme which takes care of certain key areas including flexibility, mentorship, funding support," said Ridhish Talwar, incubation manager at advantEdge Partners.
advantEdge plans to incubate 30 startups over the next two years.