Artha India Ventures (AIV) has declared the first close of its second micro venture capital fund, officially called Artha Venture Fund II (AVF II), with a success of ₹250 crore. The fund has an initial target corpus of ₹500 crore and ₹100 crore optional green-shoe. This new fund represents the interest of AIV in finding and developing new generation category-defining startups in the country. The total assets under management in AIV have now surpassed ₹1,500 crore. AVF II will be mainly concerned with investing in 36 startups that are in the seed stage in four major themes that are leading the digital transformation in India: premium consumption, fintech infrastructure, applied Artificial Intelligence (AI), and deep tech.

Investment strategy

AVF II will be a systematic and patient capital deployer that remains consistent with AIV being a founder-oriented investor. The fund will use the first round investment cheques of approximately ₹4 crore for the startups of its selected startups. In case of its most promising portfolio companies, AIV will be involved in subsequent follow-on rounds, investing between ₹8-16 crore. The strategy is one of four levels in a proprietary 1-2-4 model that will offer growing support to its highest achievers. The fund is to achieve a substantial position in its key portfolio companies of 15–20% of ownership and to have a deployment cycle of four years.

Improvement and market ecosystem

AVF II’s first close has been very strong, with most of the commitments being in-country. About 90% of the first close commitments were raised among Indian Limited Partners (LPs), such as major family offices, and prosperous exited founders. The international investors increased the remaining 10% of the capital. The Shahi Group, DSP Family Office, and Narendra Karnawat of Glance Finance are some of the most prominent supporters of AVF II, as well as a variety of founders of previous successful investments of Artha.

AVF II is being launched when the startup ecosystem is in the process of a major reset. According to Anirudh A Damani, Managing Partner at Artha Venture Fund, the present conditions are tough, and India has made less than 100 seed investments per month in the past eight months (excluding one), the lowest in almost a decade. The rate of graduating between Seed and Series A has fallen drastically, as low as 5-6% in recent months, while the historical average is 1 in 9 startups (12-13) within 36 months, meaning that the early-stage investment ecosystem is now capital-starved.

This new fund aims to launch on the successful track record of the first fund launched by AIV, which is the Artha Venture Fund I. The original fund of ₹225 crore, which a closed in 2021, has produced successful exits and has invested in some well-known startups, including Agnikul Cosmos, Everest Fleet, and LenDenClub. The success of AVF I supports the trust of investors in the strategy of AIV.

Conclusion

The first close of the Artha Venture Fund II closed successfully at ₹250 crores, which is a strong indicator of investor confidence in Artha India Ventures and its specialized micro-VC approach, despite operating in a tough market environment. With a substantial investment in 36 seed-stage businesses in important future-facing topics such as applied AI and deep tech, AIV is strengthening itself as an important financial driver of the Indian digital economy. The strategic and focused deployment model of the fund is aimed at providing the support that is required to transform the portfolio companies into category-defining and globally competitive businesses.