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The Chennai chapter of Keiretsu Forum, a Silicon Valley-headquartered international network of angel investors, plans to launch its own fund this year. “That is definitely on the cards. We are looking at a fund of ₹30-40 crore,” says Rajan Srikanth, Co-President, Keiretsu Forum Chennai.
Launching the fund will be one of the major activities of Keiretsu Forum Chennai, which completes five years of operation in February. The Chennai chapter has about 40 members and has made nearly 75 investments in 58 companies in the last five years.
Explaining the rationale for the fund, Srikanth said most of the members had exhausted allocation of their personal wealth to angel investments, because of which they were not able to back more start-ups or write bigger cheques. It takes five to seven years for angel investors to get exits in their investments, as the companies they have backed raise larger rounds.
Overcome hurdle in growth
Keiretsu Forum does not directly invest in the start-ups, but brings together its members and the start-ups looking to raise funds. The Chennai chapter has a monthly meeting where founders pitch to Keiretsu Forum members, who then write individual cheques in the companies they are interested in. In 2019, the number of investments fell to 12 from 22 the previous year.
The idea, according to Srikanth, is not to have an angel fund, but a venture capital fund that will invest in start-ups that have raised angel rounds from Keiretsu Forum or other investors and need to lengthen the runway till they go in for a bigger institutional round of funding. Most ventures get stuck at this stage and the proposed fund is to help them overcome a major hurdle in their path to growth.
Srikanth told BusinessLine that the proposed fund would be modelled on the lines of the Keiretsu Capital in the US. It would look to raise funds from some of its own members who are inclined to put in capital into a fund and target others, including wealth managers, that may want to diversify their asset class into investing in start-ups through a fund.
Syndicating deals
He said the last five years had been a good learning experience for Keiretsu Forum Chennai and its members. Nearly 60 per cent of the investments made were in deep-tech ventures. The Chennai chapter had invested in quite a few start-ups in the US. It had also invested in at least 10 deep-tech ventures incubated at the IIT Madras Research Park. The deep-tech investments had seen a four times improvement in value, he said.
Srikanth said Keiretsu had also started syndicating deals with other investors or angel groups, to help the founders get bigger cheques. Keiretsu Forum, he said, combined active mentorship with investments and it would concentrate more on the start-ups having the latest management information systems and proper reporting structures.