Venture Capital

3one4 Capital sees strong demand for latest fund


Early stage venture capital firm 3one4 Capital has seen strong interest from investors for its latest $100-million fund. The firm expects to close the fundraising above its initial target, founding partner Pranav Pai told Mint in an interaction.

“We will definitely be oversubscribed. It will be more than our target of $100 million,” said Pai. “We were expecting it to take the usual one and a half or two years, but we achieved oversubscription in two and a half quarters. So the fundraising has been far ahead of expectations,” he said.

The third and the largest flagship fund raised by the firm, founded by Pranav and Siddarth Pai, has been able to attract strong demand due to the performance of the previous funds, Pranav Pai said.

“Fund one and two, in their respective vintages are both in the top quartile. So we have clearly demonstrated to our investors that our portfolio construction and strategy are significantly and consistently ahead of the benchmark, which is obviously great news. Over the last six months, we’ve had many profitable exits. So I think the exit rate also is far ahead of expectations. That has given more confidence to our investors to participate in our new fund,” he said.

The Indian startup and venture capital ecosystem is seeing a strong gush of capital inflow, but Pai said that with successful public listings of startups, which are in the pipeline this year and the next, the ecosystem should see more capital flow into startups and Indian venture funds.

“Our top 10 companies going and listing, I think is a remarkable relief for the entire ecosystem that finally after 10-15 years of hard work and everyone asking questions, we finally answered that question,” said Pai.

“I think the more listings there are, the better it is for everyone. I think there will be enormous positive retail participation. I think the regulators, the markets themselves and even the government, everyone is very pleased that finally our companies are going for IPOs. When these companies list, I think that will be a full-cycle getting completed. Then we should see much more rapid acceleration from the early to the growth stage. I think that is the end of the cycle we were all waiting for. After that, you should not be surprised if there are more and more Indian funds that are becoming billion-dollar funds,” said Pai.

The pace of unicorn (startups valued over $1 billion) creation in the last few months has raised concerns in some corners, but Pai said that he is not very concerned about the strong flow of capital that is coming into Indian startups and increasing competition in the venture space.

“It has taken time for India to earn its way to becoming a top-three market. It’s not been easy. It’s been a long fight. I would say now that we are here, I welcome competition. I think more companies are being created and more problems being solved. More startups getting successful is fantastic for the ecosystem. VCs are exceptionally competitive, but they are also extraordinarily collaborative. Collaboration has become almost universal across the world. So certainly, I don’t think India will suffer from too much capital. That’s not an issue. Certainly, I think more startups should get funded,” he said.

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