Nandan Nilekani rolls out 2nd fund with $227 million – Times of India

BENGALURU: Fundamentum plans to lead or co-lead founding rounds, and invest $25-$40 million each in 4-5 startups every year. The second fund, which was oversubscribed, is little over twice the size of its maiden $100-million fund that was launched by Nilekani along with Helion cofounder Sanjeev Aggarwal in 2017. The first fund was deployed across six firms including Spinny and Pharmeasy that have turned unicorns. Canadian pension fund CDPQ invested in the first fund as a limited partner (LP) in 2018.
About 25% of the corpus of the new fund will come from Fundmentum’s core team. Besides Nilekani and Aggarwal, the team comprises Ashish Kumar, cofounder and general partner, Pratik Jain, principal, and Sanjay Chaturvedi, the CFO.
Nilekani said he is optimistic about India’s digital transformation story. “We are long-term bullish on Indian startups. India has 90,000 startups and more than 100 unicorns, maybe some of them are not unicorns now. We are seeing great entrepreneurs and entrepreneurs’ alumni; we are seeing liquidity events — people are getting exits and there is a maturing of the industry. While there could be a situation in the world, we are very confident that this is the time you get access to great companies,” he said at a press event in Bengaluru on Friday.
Nilekani said Series B and Series C funding continue to be underserved. “We have also created an advisory panel to help these companies on strategy, marketing, leadership development…as it goes back to our philosophy of giving not just money, but more,” he said. The fund is looking to invest in consumer, digital, Bharat apps and agri tech.
Aggarwal said when the first edition of the fund was launched, the real gap was in scaling up. “Most industries in India are underpenetrated on the digital front. Excluding travel, where 60%-70% has moved online, retail, finance, education, logistics have less than 10% penetration. As GDP grows and penetration of digital grows, there is a double compounding effect and that’s why we are a long-term bull on Digital India,” he said.
Aggarwal said the fund is also helping entrepreneurs scale up from being a company to morphing into an institution with a build-to-last legacy.
Asked about how entrepreneurs have managed the cash burn rate, Nilekani said, “The best that will come of the current situation is that respect for capital will go up. Entrepreneurs will be far more frugal, far more innovative, and far better at acquiring customers at lesser costs — all these things one tends to ignore when there is surplus capital,” he said.
Aggarwal said the focus was maniacal growth in the last five years. “Now, the focus is growth with efficiency, and with that, people are beginning to differentiate between good burn and bad burn. Good burn is creating market awareness and investing in the management team. But losing money at a transactional level is a bad burn. When we advise our portfolio firms, the biggest test of product market fit is when you’re making enough gross margins,” he said.