Axilor Ventures announces $100M early stage fund

Nearly 30 percent of the second fund will be used by Axilor for follow-on rounds for companies from the first fund, which was launched in 2018.
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Axilor Ventures has announced the launch of its second fund with a corpus of $100 million (Rs 770 crore). The Category-I Axilor Technology Fund II (ATF-II) will continue to back early stage startups across enterprise SaaS (Software-as-a-Service), Business-to-Business (B2B) commerce, agritech, consumer tech, fintech, and healthtech. 

The fund, which has registered with the SEBI, will continue to be backed by its founders Kris Gopalakrishnan, SD Shibulal, Professor Tarun Khanna, Srinath Batni, and Ganapathy Venugopal.

With cheque sizes averaging $500,000 to $750,000, ATF-II has also set aside 30 percent of its corpus to back 10-12 winners from its first fund, Ganapathy Venugopal told YourStory.

“We have been deliberate in setting aside a separate corpus for being able to do bridge rounds, because early-stage funding is highly uncertain. Sometimes, companies are unable to raise funding due to the timing and the market sentiment. The median first cheque is likely to be in the $500,000-750,000 range, but we are setting aside a separate corpus when the company is doing well and fundraising is getting delayed,” said Ganapathy Venugopal, Co-founder and CEO of Axilor Ventures.

He added that ATF-II has been set up as a 15 year fund to ensure higher follow-on ratio as well as the flexibility to recycle capital. 

“Our exit horizon will be between eight to ten years, so that it does not put pressure on the founders. We are looking at a three year deployment cycle with 30 companies in each cycle,” he said. The fund will continue to lead or co-lead investments rather than being a passive investor. 

Axilor’s trajectory

Axilor Ventures, which started out as a technology incubator programme in 2014, moved to early-stage investing in 2018 with the launch of its Rs 200 crore first fund, ATF-I. 

“In 2014, there was hardly any market network that made it easy for startup founders to access talent, investors, go-to-market partners, or service providers. The idea of starting Axilor was to solve these problems,” said Ganapathy Venugopal.

“We ran the largest cohort as part of the accelerator programme in the country and it was ranked number one programme for two years in a row. As things progressed, we saw two things–founder quality had improved and we also got the feedback from our founders saying that their outcome could be even better with access to capital.”

With these inputs, ATF-I was launched to target pre-seed stage companies, and has backed 54 companies to date. Of these, Axilor Ventures claims a follow-on funding rate of 77 percent for its portfolio companies from the first fund. The fund has also registered five partial exits from its portfolio driven by founder’s request, he added. 

“Nearly 21 startups have crossed Series A and moved on to next stages,” said Ganapathy Venugopal, adding that the portfolio mortality rate at the fund is less than 10 percent. He attributed these metrics to the fund-founder fit, which Axilor banks on, calling it among the top-three decisions a founder takes in their entrepreneurial journey. 

ATF-I has backed companies including Enkash, UrbanPiper, and Niramai.

“The seed fund a founder selects is among the top-three decisions they are making, after which they choose a startup idea to pursue and who are going to be the co-founders,” said Ganapathy Venugopal. He added that the ideal founder for the fund comes with a deep proprietary knowledge of the problem they are solving, with an operator mindset and execution-focused in their journey.

Funding winters and road ahead

The announcement of the new fund also comes at a time when big-ticket investors in the Indian startup ecosystem have tightened their purses. This hasn’t had a major impact on early-stage companies, and Axilor Ventures’ portfolio continues to reflect that, said Prachi Sinha, Head of healthcare investments at Axilor Ventures. 

Early stage funds announced in Q1 FY 2023

“All of our portfolio companies have a runway of 16 to 24 months, so it is not a cause of worry for us,” she told YourStory, adding that the portfolio companies continue to be more capital efficient compared to competitors in the space. 

What will also help the ATF portfolio companies survive the funding winters, according to Ganapathy Venugopal, is going after existing market demands rather than trying to use capital for market creation. 

“There is so much inefficiency that technology can solve. Going after these models means the founder can hit the road running with the product they have built out rather than create a new category that didn't exist,” he added.

(The story was updated to reflect that the accelerator programme was ranked number one for two years.)

Edited by Megha Reddy

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