Software startup accelerator Upekkha on Monday said it has launched an incremental fund called UP Funds that will invest $2.5 million per year in global software businesses.
Incremental funding comprises partial funding of a contract or an exercised option, with additional funds anticipated to be provided at a later time. Such funds are termed rolling funds.
The fund, Upekkha said in a statement, is expected to invest $100,000 in startups under its accelerator programme that have built a ‘SaaS Flywheel’, and make 20 such investments annually.
A SaaS Flywheel, the statement said, is a sustainable revenue model with efficient operating capital. In industry parlance it is one system of inbound sales marketing that is different from traditional models.
UP Funds has been listed on AngelList’s platform, the statement added.
“Unlike traditional investment models, the UP Funds’ model is designed to increase optionalities for SaaS startup founders by allowing them to choose to return (invested) capital through their own recurring business profits, by taking part in strategic exits, or by going public,” the statement added.
The model is inspired by those pioneered by B2B SaaS investment firms such as Indie.vc, TinySeed, and Earnest Capital, the statement added.
“Bootstrapping vs. funding is a false dichotomy; SaaS startups need the right model of capital at the right time... UP Funds scales the flywheel with a pooled incremental fund that helps SaaS founders achieve freedom to choose their own success paths by building recurring profits with low capital investments,” Upekkha managing partner Prasanna K said.
Startup founders working with Upekkha burn less than 15-20% of their equity to get to their first $1 million in annual recurring revenue in contrast to 30-40% without Upekkha, the statement added.
The fund’s LPs include Charts.com founder and CEO Pallav Nadhani, and Minjar founder Vijay Rayapati. Charts.com was bootstrapped and sold to Fusioncharts previously, and Mijar was bought by Nutanix in 2018.
“As a SaaS entrepreneur and angel investor, I am delighted to see how the UP Funds model provides utmost control and choices for founders while building a flywheel with the high margin recurring revenue model,” Nadhani said.
Over one-third of the startups under Upekkha’s accelerator programme are currently growing at over 50% year-on-year, it said.
Founded in 2017, Upekkha has helped over 60 SaaS startups design their business flywheel to operational profitability.