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Pontaq, a UK registered venture capital fund that invests in ventures involved in cross-border technology transfer between the UK and India, is in the process of raising its third fund, the UK India Innovation Fund 3, of £50 million.
The third fund is structured in such a way that for every £1 that it raises from investors, the UK government will contribute £1.5, subject to due diligence.
The first fund was £1 million in size and the second fund, £5-10 million.
Pontaq is also in the process of raising the second fund, for which the UK government has provided tax breaks for UK tax payers investing in the fund, while Indian tax payers are allowed to invest through LRS (Liberalised Remittance Scheme) as approved by the RBI, according to Mahesh Ramachandran, based in India, and Prem Barthasarathy, based in the UK, both General Partners of the fund.
They told BusinessLine here on Tuesday that Pontaq has started investing from the second fund, while it will start deploying from the third fund after the UK Government puts in the money. The third fund has secured commitment of about £8 million so far.
Of the proposed £50 million third fund, Pontaq will raise £20 million from external investors and the UK Government's share will be £30 million. It will invest 70 per cent of the money in UK- and Europe-based start-ups and the balance in ventures in rest of the world, which includes India.
Investment plan
As in the first two funds, the third fund too will invest in three sectors – FinTech; emerging technologies such as IoT, AR/VR, AI and blockchain; and smart cities technology, including energy, waste, water and transport.
According to Ramachandran, the third fund will come in at the pre-Series A and Series A stage of the ventures. It will invest £1-3 million, in multiple rounds. At the stage that Pontaq comes in, the start-up will have some kind of traction in the market, preferably a few paying customers or a really strong IP.
At least three ventures in which Pontaq had invested in from its earlier fund were planning to enter India, while an IoT start-up in India that Pontaq was appraising for an investment opportunity was looking to enter the UK.
India plans
Pontaq, according to them, is also working on an India-specific fund that will be registered with the Securities and Exchange Board of India as an alternative investment fund. This fund, apart from investing in the sectors that the UK India Innovation Fund 3 focusses on, will also look at healthcare and medtech as two additional sectors to back start-ups in. Barthasarathy said there was tremendous scope for these two sectors in India and they also tied in with the Smart Cities Tech focus of the third fund.
He said Pontaq would also look at an energy fund, one that would focus on the entire chain – rooftop solar for individual homes, to peer-to-peer sharing of electricity, to feeding excess power to the grid to charging of electric vehicles.
Barthasarathy said Pontaq's ultimate aim was to have a smart city, for which it had even decided the name – Anugraha, the name by which Pontaq is registered with the UK's financial regulatory body. The plan was to invest £1 billion to support one million people, or, about 250,000 households.
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