Where creating wealth for founders, investors is a mission

For Mohit Gulati, Managing Partner and CIO, ITI Growth Opportunities Fund, a seed- and early-stage venture capital firm, investing is not just about identifying the right opportunities and putting in money. “The idea was take money, invest in the right businesses and return money,” he says. Most investors, he adds, have got the first two parts right, but do not talk about the third bit, which is about returning money to the investors in the fund.

It is for this, he says, that they decided to keep the life of the first fund as five years, unlike the seven years plus one year as most VC funds are designed. “It is a five-year fund and we will give back capital within those five years. That is the style of investing,” emphasises Mohit. He explains that over the 10-odd years of investing experience he has got, if a business has to survive and thrive, it is going to happen in the first two-three years. If, in the third year, you don’t have visibility of this business growing or you getting an exit then clearly the plot is lost.

Being a five-year fund, does it not put pressure on both you as the investor and the entrepreneur, who has to be prepared for an exit, when most other funds are of seven years? “The entrepreneur,” says Mohit, “has no idea that it is a five-year fund. The agreement is stated in such a way that we have put in a caveat that we want to exit by the fourth year. This is a knife that hangs on the fund manager’s head, not on the entrepreneur’s.”

ITI Growth Fund got SEBI approval in December 2018 and has done five investments so far. It is a ₹100-crore fund and nearly a fourth of it has been raised from the parent ITI group, which has also given a capital commitment for the entire amount.

According to Mohit, the fund is broadly sector agnostic. “It is easier to answer on what we are not going to do. We probably will not do EdTech and AgTech. Those are two sectors where it is hard to build the businesses, get the scale and get that five-year exit for us. Besides that, we are fairly open to a bunch of sectors,” he says. The fund is fairly excited about B2C businesses, thanks to the ecosystem that, he says, is conducive to building the right B2C brands. The fund will be keen to look at SaaS companies, deep tech, AI/ML ventures. The trick, he says, is to catch a trend before it becomes a buzzword. That is how to make money.

Seed stage investment

ITI Growth Opportunities Fund will invest in the seed to pre-Series A stages, writing cheques from about ₹70 lakh ($100,000) to ₹3.5 crore ($500,000) “We would say that we are larger seed stage investors and that range of seed can be from $100K to $500K depending on what the business is,” says Mohit. The fund, he adds, is “extremely founder friendly,” and at no stage will it look to own more than 18-19 per cent stake in a venture it invests in. The stake it will pick up between 10 per cent and 20 per cent.

Although it will look for partial exits at the Series A stage, the fund, according to him, will aim to double down on some of the ventures that it feels are winners. “Hold on to your winners is what the success mantra is.” In ventures that the fund believes are multi-baggers, it will invest up to $1.5 million, over multiple rounds.

Mohit continues to be upbeat about the B2C space. “We have been gung-ho about what is happening in the B2C space, because we are of the firm belief that India’s consumption of brands and products is changing a lot. There is no more love and loyalty as there was. The millennials are not consuming that way. Today, using technology and using internet, you can be a pretty large brand in no time,” says Mohit. All their investments in the B2C space have a different proposition, they are not me-too, run-of-the-mill kind of things.