8i Ventures is nearing the final close of its second $50 million fund thanks to a windfall from the exit of its M2P fintech investment, the venture capital firm’s top executive said.
Several large institutional investors, including GMO Fintech, a subsidiary of Japanese conglomerate GMO Internet Group, and the financial arm of TVS Credit, have agreed to participate in the Mumbai-based company’s second fund, said Vikram Chachra, founding partner at 8i Ventures . Mint. He added that the firm is in final talks with major Indian and global banks, global corporations and family offices in the US and Europe.
Queries sent to GMO Fintech and TVS Credit were unanswered at the time of publishing the story.
“We are in the final stages and should conclude it in the coming months. Valuations have come down quite a bit, so our target is $50 million, but the final close could be between $40 million and $60 million,” Chachra added.
8i Ventures achieved the first close of its second fund for $25 million in November 2022, largely from family offices Salgaocar and Kothari (DSP), which also invested in 8i Venture’s first fund. The firm had initially targeted a final fund close of $50 million by March 2023, but this was delayed while it awaited commitments from new institutional investors, Chachra said. He said he hopes to close in two or three months.
Exit of M2P bonanza
The early-stage venture capital firm, which invested $9.7 crores into M2P Fintech in January 2020 from its first fund, with returns recorded of almost $116 crores in just 4.5 years. The pre-tax returns were 1.27 times the total corpus of Fund I, even after the company invested only about 10% of the corpus of the first fund.
“We had the opportunity to offer a very high DPI (ratio of distributions to paid-in capital). “If we didn’t exit now, the next opportunity could have come through an IPO, which is another two or three years,” he said.
M2P Fintech software-as-a-service (SaaS) startup raised $850 crore in a funding round led by Helios Investment Partners, in a mix of primary and secondary share sales in September.
Chachra said the company believed this round helped it reward its investors with a sizable payout, potentially recycling capital for the next fund.
“In our first fund, we did a small exit from M2P, which helped kick-start the second fund,” he said.
This comes as the LP community is prioritizing real cash returns as a key metric for evaluating venture capital funds, overshadowing high valuation spreads, many of which stem from the 2021 funding boom.
Founded in 2019 by Chachra and Vishwanath V, the early-stage venture capital fund backs founders from the fintech and consumer sectors. 8i Ventures launched its first fund in May 2019 and officially closed it in July 2021. The fund raised $15.5 million ( $130 crores at current exchange rate): $13 million in assets under management and $2.5 million co-invested with associate companies.
In June 2022, 8i partially exited M2P Fintech, reducing its stake along with that of co-investment partners from 4.5% to 3.7%. To be sure, 8i completely exited M2P in the current round. The company has active investments in Slice, Blue Tokai, Eazebuzz, and TransBnk, among others.
From its Fund 2 corpus, 8i Ventures initiated pre-seed investments through its recently launched Origami model in March this year. The goal of the model is to make faster investments in smaller bills, between $250,000 and $2 million.
Chachra told him Mint that 8i Ventures has analyzed around 600 startups in the initial phase of its investment program. From this group, the firm selected four startups to invest.
The second round of the program, which will be held twice a year, will begin on November 14.
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