[EXCLUSIVE] Former TPG NewQuest exec launches equity fund to revive dying startups

Sachin Khandelwal, former Managing Director at TPG NewQuest, is set to launch Sporos Capital, an equity fund aimed at reviving tech-enabled companies amid a prolonged funding slowdown for growth-stage startups, sources told YourStory.

Sporos Capital will be a Category II Alternative Investment Fund (AIF) with a corpus of Rs 600 crore, having a green shoe option of Rs 1,000 crore, according to a pitch deck seen by YourStory. The fund has onboarded Stride Venture’s Ishpreet Singh Gandhi, Lifelong Group’s Chairman Atul Raheja, and StrideOne co-founder and Chief Business Officer Sameer Mahajan onto its leadership team, the pitch deck showed. The new fund will be part of Khandelwal's newly launched venture, Forward Capital, sources said.

While the pitch deck showed Gandhi and others to be part of the management team, sources said that as of now, Khandelwal is the only person managing the fund, while others are sponsors in individual capacities. Gandhi and Khandelwal declined to comment.

The fund will be charging a management fee of 1.25-2% per annum, with a carry or carried interest—the share of profit a VC fund takes home from the overall profit–of 20%, the pitch deck showed.

Venture capital firms typically charge fees to LPs to manage funds. Most VCs charge about 2% fees of the total fund size.

The fund’s entry into the market amid a period of low internal rates of return (IRR) in venture capital and private equity suggests an effort to seize opportunities during the funding downturn. According to the pitch deck, Sporos aims to replicate the growth seen after the dot-com bubble by entering the market at this moment.

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The sector-agnostic venture capital fund is looking to tap startups that have struggled to raise capital. Mid-stage and late-stage tech startups struggle to raise funds as venture capital firms look to steer clear of risky investments amid a slowdown in returns and unimpressive payouts to limited partners (LPs).  

Asset reconstruction companies (ARC) and special situation funds (SSF) have failed to provide support for smaller players in the market and are concentrating on large and traditional assets, Sporos said in the pitch deck. These assets offer significant opportunities for deep restructuring and high returns, aligning with a more secure appetite. 

The move to launch an equity fund for reviving startups comes at a time when the valuations of once high-flying startups such as OYO and BYJU’S have faced a significant downturn, with a 74% and a 99% decline, respectively, the VC said. The valuation markdowns have sent a ripple across the startup ecosystem, Sporos said. 

It is to be noted that the fund, which aims to help revive cash-starved startups has Lifelong Group's Raheja as part of its leadership team. Lifelong Group notably led a consortium in acquiring troubled automotive startup GoMechanic last year. Reports had suggested that the company had a debt of around $20 million.

This has made startup founders, operating on tighter liquidity and rising pressure, exit as funds reach the end of their cycle, unable to demonstrate success, Sporos said. According to the fund, market corrections have posed an attractive entry point for Sporos to mimic the global success of SSFs in India.

The fund aims to deliver 5X to 8X on individual investments, delivering over 30% IRR. According to the deck, the median IRR for VCs in India has been hovering between 3-22% over the past decade.