Exclusive: Exfinity Ventures raises Rs 80 crore in first close of third enterprise technology focused fund

Exfinity Ventures, the Bengaluru based venture capital firm founded by former IT services executives, has raised Rs 80 crore ($10.5 million at current exchange rates) as part of the first close of its third fund. The fund, dubbed Exfinity Technology Fund 3, has a final target corpus of Rs 500 crore ($65.8 million) and expects to exceed the target at final close, a top executive at the firm told TechCircle.

The final close of the fund, V Balakrishnan, founder, general partner and chairman at the firm, said, is expected in the next 18-24 months instead of the planned 12-18 months.

"We are in the process of raising the third fund and have done the first close at around Rs 80 crore. We are having constant dialogues with large institutions and they have shown interest. Because of the lockdown, we have not been able to meet them. Once the lockdown is over, we are confident of raising the fund because our first two funds have done well," Balakrishnan said.

The Bengaluru-based firm aims to invest in 15-20 companies from the third fund. Cheque sizes will range between $1 million and $2 million.

Last week, Exfinity launched an initiative to fast-track funding for seed stage startups in the B2B space. Any such startup looking to raise investment in the near future or currently looking to raise investment to extend their runway to see them through the Covid-19 crisis is invited to approach the firm with their pitch deck. The firm said that it would expedite the process to fast track the funding process even without a face-to-face meeting.

Exfinity's first fund, launched in 2014, had a corpus of around Rs 125 crore. The second fund was launched in 2015 with a Rs 300 crore corpus. Some of the companies in the portfolio include Locus, Fitternity, IQlect, MoEngage, CloudSek, Log9 Materials, Vernacular.ai and Spyne.

Founded in 2014, Exfinity invests chiefly in business-to-business (B2B) technology startups in India and in the India-US corridor. The investment firm is run by former Infosys executives and board members Balakrishnan and TV Mohandas Pai; former Wipro CEO Girish Paranjpe and former i-flex CEO Deepak Ghaisas.

The firm, registered with SEBI as an Alternative Investment Funds (AIF), raises capital only from domestic institutional investors or limited partners. 

"Yes, it is mostly domestic investors… In all our funds, the founding partners have put only 15-20% of our own capital, while the rest came from external investors and institutions," Balakrishnan said.

With interest rates hovering at around zero across North America, Europe and Japan, Balakrishnan said that raising money should become easier despite the Covid-19 crisis. 

"Whether it is family offices or domestic financial institutions, it should not be that much of a challenge. However, high net worth individuals might be slightly circumspect and need to be convinced that startup investments as an asset class is still good. Thankfully, we are a B2B focused fund and our portfolio looks better. Consumer startups have come to a standstill. Customers are working remotely on a SaaS model," he said.

Exfinity's first fund, which comes to the end of its term in another two years, had expected to see some liquidity but that has now become a challenge. “While our first fund has got another two years of runway and we will be able to get liquidity, because of the lockdown, the fund has not been able to pursue that. We hope to do this once this crisis is over," Balakrishnan said.  

Early this month, portfolio company Vernacular.ai, which offers multilingual artificial intelligence (AI) based voice automation services, had raised $5.1 million in a Series A round led by Exfinity and IAN Fund.

Late last year, Exfinity participated in Bengaluru-headquartered cleantech company Log 9 Materials funding round of approximately $3.5 million in a Series A funding round along with Sequoia Capital India’s accelerator programme Surge.

In September 2019, Hyderabad-based edtech startup 3rdFlix, which offers visually-interactive educational content, has raised $5 million in a pre-Series A round of funding, led by Exfinity.