a99 to launch $100M fund, to focus on startups developing ancillaries to sunrise industries
The new fund is a 8X jump from a99’s previous fund which had a target corpus of Rs 105 crore and invested in companies including EV-maker Raptee and med-tech firm EzeRx, among others.
Advanced manufacturing-focused venture capital firm a99 (formerly known as Artha99) is raising its third fund with a target corpus of $100 million (~Rs 850 crore), Founder and Managing Partner Vignesh Shankar told YourStory.
The firm has already received soft commitments for $30 million and will actively start raising in the next few months.
The firm, which hopes to start writing cheques from Fund III from April 2026, is looking to back early-stage companies that range from pre-Series A to pre-Series B startups with cheque sizes ranging from Rs 20 crore to Rs 80 crore.
a99 is following in the footsteps of other niche VC firms that are setting aside a portion of funds to make follow-on investments in its portfolio companies. Around 20% of the new fund will be earmarked for follow-on rounds and the remaining 80% will be used to make fresh investments, Shankar said.
The Chennai-based firm is no stranger to the investment landscape, having started with a $1 million fund back in February 2021, directly from Shankar’s pocket while he was leading Stanley Black & Decker’s Industrial division for APAC.
In 2021, Shankar quit his corporate stint and took up investing full-time, setting up the Sebi-registered fund a99. In 2022, the firm launched Fund II, which had an initial target corpus of Rs 50 crore. But due to high interest, the firm had to exercise the greenshoe option. This saw its Fund II have a total corpus of around Rs 105 crore.
These funds were a learning curve for a99, Shankar said, one that helped the company form the themes overarching their strategy for their upcoming investments from the new fund.
“We identified four pillars or four strategic poles where we want to invest in,” Shankar said. The first pillar is that of IP or R&D driven manufacturing.
According to a99, these products would stand the test of time in the market due to the uniqueness of their product, helping the company enjoy higher margins. “For example, if somebody is able to manufacture motors without magnets or without rare earths, it is IP. You can't just reinvent the wheel without IP,” he added.
The second pillar is based on the shovel strategy—a strategy that is based on the old saying, “In a gold rush, sell shovels instead of digging for gold” which means instead of taking the high-risk route and investing in capital-heavy sunrise industries, like semiconductors, nuclear energy, or solar, a99 will look to back startups that are building enabling technology or ancillary businesses that these industries absolutely need.
According to Shankar, the third pillar is to back companies that are spearheading digitisation manufacturing in India. And the fourth and final pillar is infrastructure and infrastructure-led ancillaries.
a99 has made one exit from its Fund I portfolio—London-based application development software provider, Futurice UK, which is a subsidiary of Futurice Finland. The firm had acquired a99’s shares which saw the VC firm cash in 7X returns.
It is currently waiting for some of its other portfolio companies to raise follow-on rounds to sketch their exit route. Some of the firm’s portfolio companies include EV-maker Raptee, rare earth-magnet free motor maker Aditya Avartan Technologies, and specialty chemical manufacturer Innocule, among others.
Despite having made investments outside India in the past, a99 is no longer actively looking to invest in companies abroad. “I don't see too many manufacturing startup founders going abroad and setting up operations. So I think India will drive this space and it's (investments) all going to be in India. Unless something is phenomenally good, as a strategy, we don't want to look outside,” Shankar added.