Pharma, healthcare sectors are the Fulcrum of its investments

Having morphed from a proprietary fund into one that invests in early-stage ventures, Fulcrum Ventures will continue with its focus on the pharmaceutical and wellness space.

That is because of historical reasons, explains Krishna Ramanathan, Founder-Partner, Fulcrum.

Fulcrum was set up with the money that Krishna’s father gave him, from the proceeds that he got by selling the pharmaceutical company that he had started. Since there was a non-compete clause for three years after the sale, the fund was invested in non-pharma sectors, including in one real-estate company.

Once the three-year period ended, Krishna started investing from the fund in the pharma and wellness space, essentially as early-stage investors, using the proprietary money.

The fund invested in four companies along with others. It was after it exited its investment in real-estate company Casa Grande that Krishna decided to convert Fulcrum into a SEBI-registered venture capital fund, and put in ₹26 crore from his own kitty.

Fulcrum is now in the process of becoming a ₹85-crore fund, of which it has done the first close of ₹60 crore. Most of the investors are good quality people, he says.

One is a partner with consultancy firm McKinsey and another is a wealthy individual.

Krishna says that since it is only now that he has come out to raise funds, there are individuals cutting small cheques.

Fulcrum has deployed ₹45 crore of the money it has raised so far. It has invested in three companies – Shield Healthcare, a pharma company based in Chennai; hair and scalp clinic Richfeel based in Mumbai; and, a non-pharma company called Congruent Solutions.

He says Fulcrum will largely stick to the pharma and wellness space because of its legacy. “I would like to think that 70 per cent of our investments would be in the pharma, wellness and healthcare space, at least for this fund,” says Krishna, 37, an MBA from XIM, Bhubaneswar.

In its earlier avatar, Fulcrum invested anything from ₹50 lakh to ₹5 crore in the companies in which it took a stake.

Now, it is looking to invest between ₹5 crore and ₹15 crore, which means it will put in money in companies that have a slightly higher turnover – of ₹20-50 crore.

Fulcrum will pick up a significant minority stake in the companies it invests in, with the sweet spot being around 25 per cent.

For instance, in Shield Healthcare, which had put up a plant near Chennai and which was running into cash flow problems to complete the plant, Fulcrum invested ₹20 crore in a quasi-primary and secondary investment for a 40 per cent stake.

In the Mumbai-based Richfeel it picked up a 12 per cent stake. He admits that since fund-raising was a new experience for him, it took longer than he expected to achieve the first close of Fulcrum’s fund.

It has been a fairly tough fund raising environment, he says mainly because, in his own words, he was largely unknown in the circles. Whatever money that came in, came in trickles, he adds.

“We like to play the role of an i-banker from inside,” says Krishna, of Fulcrum’s role in the companies it invests in.

“We know the kind of companies that a private equity firm wants. And, many of the large private equity firms are looking for quality deals.”

There is need for strict financial discipline and most promoters do not pay attention to that aspect.

“We get in there, set it up and tell them this is how your valuation is created. We are in conversation till we build up that story,” says Krishna.

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