Welcome to our ‘Fund in Focus’ series where we profile our member funds, underscore their investment philosophy, and highlight some of their interesting work. Today we speak to Vikram Gupta, Founder and Managing Partner, IvyCap Ventures. Here he delves into IvyCap Ventures, a sector-agnostic fund investing in early-stage companies with innovative technology-based solutions. The 'India Opportunity' excites IvyCap due to India's large, tech-savvy population and favorable regulatory reforms. Leveraging the global IIT alumni network, IvyCap identifies promising startups with scalable business models, focusing on sectors like healthcare, agritech, and finance.
FUND IN FOCUS: Building for Tomorrow: Why the 'India Opportunity' Excites IvyCap Ventures
Spokesperson: Vikram Gupta, Founder and Managing Partner, IvyCap Ventures
1. Can you elaborate on IvyCap Ventures' investment thesis and focus areas? How do you identify promising investment opportunities within these sectors?
We are a sector-agnostic fund driven by a strong belief in the power of individuals to ignite innovation and disruption. Our focus is on investing in early-stage companies with differentiated business models and robust unit economics. We target startups in the early to growth stages (Seed, Pre-Series A, Series A, and Series B) that are developing innovative technology-based products, services, and business solutions capable of scaling and competing in a competitive market.
Leveraging the global IIT alumni ecosystem, our investment philosophy centers on identifying and nurturing innovative ideas and startups positioned to excel in an era of exponential growth. We prioritize the evaluation of founding teams as our primary criterion for investment, closely followed by a comprehensive assessment of a business's growth potential, scalability, and unit economics. Our goal is to invest in capital-efficient enterprises capable of scaling with minimal capital infusion. Moreover, we place significant emphasis on Sustainable Development Goals (SDGs) and corporate governance in our investment approach.
2. What excites you about the 'India Opportunity'?
India's demographics play a pivotal role in this opportunity. With a population of over 1.44 billion people and a growing middle class, the country boasts heightened consumption levels. Moreover, India has experienced extensive digital penetration, with a significant portion of the population accessing the internet through smartphones. This widespread adoption of technology presents fertile ground for the continued growth of consumer tech companies, poised to cater to the evolving needs and preferences of Indian consumers.
Furthermore, the growing significance of technology solutions is reshaping the startup ecosystem in India. These technologies are driving innovation across various sectors, from healthcare to agritech to finance, and offering immense opportunities for startups to disrupt traditional industries. As India continues to embrace technological advancements, it solidifies its position as a hub for cutting-edge technology and disruptive innovation.
India's regulatory landscape has undergone significant reforms aimed at streamlining processes and enhancing transparency. These reforms have contributed to a more investor-friendly environment, where regulatory uncertainties are minimized, and compliance procedures are more straightforward. The stability of the political environment further reinforces investor confidence.
Thus, collectively, these factors contribute to the allure of the 'India Opportunity,' making it an exciting and promising destination for investment with vast potential for growth and innovation.
3. Could you highlight a few notable success stories from IvyCap's portfolio, showcasing how the firm's investment and support have helped start-ups thrive and achieve significant milestones?
Yes, there are several success stories:
Purplle: We invested in Purplle.com from our Fund 1 and Fund 2. When we first invested in Purplle in 2015, we were confident that technology would disrupt and redefine the beauty industry in India. With an initial investment of $2M (INR 15 crore) from our Fund 1 growing manifold to USD 45M, our partnership has been rewarding. Achieving a 22X return, our belief in the brand and the vision of its founders, 'Beauty for All', enabled us to generate 1.35x of our entire Fund 1 in Purplle. This is the first Dragon from our portfolio.
Clovia: We invested Rs 15 crore from Fund 1 in 2015 and just over Rs 30 crore from Fund 2 in 2019. We owned more than one-third of the company between Fund 1 and 2 at the time of the sale. At the time of the exit, Reliance Retail Ventures Limited (RRVL) acquired an 89 percent equity stake in Purple Panda Fashions Private Limited, which owns and operates the intimate wear brand Clovia.
Pharmarack: In 2021, we announced the sale of our stake in the business-to-business (B2B) healthtech platform Pharmarack at an internal rate of return (IRR) of 104%. We sold our stake in the acquisition deal for Pharmarack for INR 42 Cr ($5.5 Mn) after investing INR 21 Cr ($2.8 Mn). Pharmarack's acquisition by a consortium of pharma giants including Sun Pharma and Cadilla Pharma is indeed a success story.
BlueStone: Another portfolio company, BlueStone, will soon be announcing its IPO. The success of BlueStone in the jewelry industry debunked all apprehensions about the online jewelry segment. The company has 150 physical stores, making them one of the top jewelry sellers in the country.
Our other notable exits include Sokrati's acquisition by Dentsu International, Aujas’s acquisition by NSEIT, and others.
4. IvyCap emphasizes investing in passionate founding teams with credible professional experience. Could you share some criteria or characteristics that IvyCap looks for in founding teams during the investment evaluation process?
We have always placed significant emphasis on investing in passionate founders who are excited about the disruption or innovation they bring. During our investment evaluation process, we meticulously assess various criteria and characteristics to determine the suitability of founding teams:
Mindset of the founder: We scrutinize the EQ and IQ levels of the founders, valuing those with a growth-oriented mindset. Resilience, adaptability, and forward-thinking are paramount qualities we seek, as they enable founders to navigate challenges and seize opportunities in a dynamic market environment.
Passion for creating something innovative: Founders driven by passion are more likely to persevere and succeed in their endeavours. We prioritize entrepreneurs who exhibit deep enthusiasm for their vision and demonstrate unwavering commitment to achieving their business objectives. This led us to invest in diverse industries like Biryani by Kilo, Purplle, BlueStone, Eggoz, Miko, as well as companies like YelloSkye, Celcius, Agraga, ZestIot, GradRight, etc.
Skillset of the team: We have always believed in investing in entrepreneurs and their team. A diverse skill set within the team is crucial for addressing the multifaceted demands of business development and scalability. We evaluate the technical, managerial, and leadership capabilities of the founders and their team members, ensuring they possess the necessary expertise to execute their business strategy effectively.
Business Model and Value Perception: We scrutinize the business model for its capital efficiency and assess the founders' perception of value in us. Additionally, we consider the terms and pricing of the deal, ensuring alignment of interests between IvyCap Ventures and the founding team. By prioritizing these qualities in founding teams, we aim to identify entrepreneurs who possess not only a compelling business idea but also the passion, skills, and collaborative spirit necessary for successful execution.
5. The firm leverages global alumni networks to create a competitive advantage. How does IvyCap harness these networks to support portfolio companies and drive growth?
We leverage global alumni networks to gain a competitive advantage and bolster the growth of portfolio companies. Comprising distinguished leaders from prestigious Indian educational institutions such as the IITs and IIMs, the alumni network offers a unique platform with unparalleled access to high-quality resources. These networks help harnessing to source deals effectively. The extensive reach of the alumni network enables the firm to tap into a wide pool of potential investment opportunities, providing access to promising startups and innovative ventures across various sectors. Moreover, the alumni ecosystem serves as a valuable resource for finding the right talent and mentors for portfolio companies. They can offer guidance, mentorship, and strategic insights.
6. Active mentoring is a key aspect of IvyCap's support ecosystem for startups. Could you elaborate on the type of mentorship provided to portfolio companies and how it contributes to their success?
The startup journey can be quite arduous and lonely for founders. Many times, founders look for a confidant to hear them out, besides guidance on solving specific business problems. We, along with our mentors, are sensitive to the softer aspects of a founder-mentor relationship, and it has played a significant role in the success of our mentor model. Our mentorship model is distinctive and well-organized, offering comprehensive support for execution, scale-up, and exit strategies to our portfolio companies. Comprising both corporate executives and accomplished founders with firsthand entrepreneurial experience, our mentor pool equips each portfolio company with invaluable guidance. These mentors provide dynamic coaching across various areas such as strategy development, capacity building, recruitment, and go-to-market strategies, ensuring that our portfolio companies receive tailored support for their specific needs throughout their journey.
Examples of our successful mentorship include partnering Clovia with industry luminaries like Sharon Jester Turney and Ravi Dhariwal for brand building and omni-channel strategy. Also, mentors adept in the beauty industry helped Purplle execute a brand strategy. These examples show how our mentorship model drives tangible results and contributes to the growth of our portfolio companies.
7. Sustainability and responsible investing are integral to IvyCap's philosophy. How does the firm incorporate Sustainable Development Goals (SDGs) into its investment decisions? Can you provide examples of portfolio companies that have successfully aligned their business models with SDGs?
In the fast-evolving world of investments, sustainability is no longer a mere buzzword but a cornerstone for success. Every decision made today has the potential to shape the future, and at IvyCap Ventures, sustainability is woven into the fabric of our investment philosophy. For over four years, we have made it a fundamental part of our approach. Our dedicated Sustainable Development Goals (SDG) team meticulously evaluates potential investments, scrutinizing environmental and social impacts from inception to exit. We go beyond lip service, actively exploring ways to amplify the positive impact of our portfolio companies. Each of our investments aligns with SDGs, with our companies actively tracking their targets. The tangible positive outcomes across our portfolio stand testament to the success of this commitment. Decarbonization and social equity take center stage in our strategy as we assess each company's potential for SDG impact and help build robust governance structures. Our emphasis is on integrating SDG goals into every aspect of a company's operations before taking a philanthropic approach to sustainability. From waste and water management to workforce health, safety, and product distribution, we set metrics, policies, and KPIs, conducting annual impact assessments.
Examples of SDG initiatives for our portfolio companies include:
Biryani By Kilo:
- The expansion of the business unit has led to hiring from Tier-2 areas, facilitating significant employment generation and the establishment of a reputable brand name for the company
- The organic packaging is sourced from local artisans, bolstering the community's income and providing opportunities for skill expansion on a broader level.
- 1,33,154 free food packages served.
- Packaging is organic and sourced from local artisans, supporting the community with better income and prospects of expanding their skills on a larger scale.
- 50 Lakh customers served in earthen clay pots sourced by local kumhaars.
Celcius Logistics:
- Vaahan Vikas Yojana- Bridging the gap by incentivizing the adoption of Reefer vehicles among transporters, providing various benefits to the Regional Transporters that act as strong incentives for them to participate, including monthly assured income, consistent year-round business, funding, growth opportunities, and access to the entire Celcius Tech platform.
Expertrons:
- Over 500,000 users, including 5,000 paid, have boosted their careers with better salaries and jobs. Mentorship and guidance programs have empowered economically disadvantaged individuals to escape poverty.
Clover Ventures (Deep Rooted):
- Engage with over 1,000 farmers to promote Sustainable Farming Practices, including controlled environment farming for yearlong consistent high quality, pesticide-free practice using natural and biological alternatives, intercropping to divert pests away from the main crop, drip irrigation for timely and adequate usage of water saving water by 60 percent, precision farming using technology for optimal resource utilization, mulching to retain soil moisture, prevent weeds and herbicide usage, crop rotation for maintaining soil health, contour farming, and hydroponics.
- Impacted more than 1000 farmers, cultivating over 1500 acres of land, for over 300 varieties of fruits and vegetables delivered within 16-20 hours from farms < 150 kms away.
Eggoz:
- Initiative taken: The company collaborates with the Bill & Melinda Gates Foundation and ICICI Foundation to introduce a small-scale model for farmers, requiring an investment budget of only 3-4 lakhs. 1/4th the emissions of a conventional model.
FtCash:
- Initiative taken: Enable micro-merchants, small businesses, retail chains, and home-based entrepreneurs to utilize the potential of mobile payments. FTcash has an incredibly positive impact on 1000+ small merchants, businesses, retail outlets, and individuals to be inclusive in utilizing the other means of financial transactions which are done through other than cash. It is the objective of the company to bring everyone under an umbrella.
Miko:
- The company recycles 100% of the e-wastes generated, which is roughly 1262 tonnes.
8. IvyCap is committed to upholding high-quality governance structures. How does the firm ensure strong governance within its portfolio companies, and what role does it play in mitigating risks and driving long-term value creation?
In an era of heightened corporate governance scrutiny, IvyCap Ventures has always prioritized strong governance as a cornerstone of our investment strategy. We recognize that the dynamic startup landscape demands more than just financial acumen—it requires unwavering commitment to ethical operations. Hence, corporate governance is not a mere checkbox; it is a guiding set of principles that inform every decision. We take proactive steps to ensure our portfolio companies operate responsibly, nurturing them to surpass profitability expectations through transparent and responsible governance practices.