Filter Capital closes ₹800 crore debut fund

About 60% of the capital is domestic and 40% foreign, Nitin Nayar, co-founder and managing partner, Filter Capital, told Mint, adding that institutional capital represents almost half of the funds raised.

The firm has received capital commitments from Indian institutional investors and family offices such as HDFC Fund of Funds, SIDBI, SRI Fund, Oister Global, DSP family office, Akash Prakash, the founder of Amansa Capital, and Harsh Jain, the CEO of Dream11.

Filter Capital’s co-founders Nitin Nayar and Sumit Sinha have experience of nearly two decades in private equity. They have worked together for over eight years at global equity firm Warbug Pincus and have led investments in companies like Capillary Technologies, CarTrade, and Quikr. Sinha has also led investment in gaming unicorn Dream11 and AI company Quantiphi.

The growth investment firm will invest in Series B and Series C rounds as lead or leading investor, said Nayar. “We are typically going to invest somewhere between ₹60 and ₹100 crore per company, of which 75% is typically reserved as the initial check, and the balance is reserved for follow-on rounds,” he said.

The fund will invest across sectors like IT services, software, FinTech, and tech-led businesses in consumer and B2B and financial services and education. “I think two-thirds of what we do will be IT services and software,” Nayar said.

“We’ll probably have eight to ten companies in the fund, which means with four down, there are about four to six to go,” he added, noting that the firm will deploy this capital in the next two-three years before returning to the market for fund two.

“We’re playing in a very unique space, because if you look at the tech investing landscape, there is a lot of activity on the venture capital side,” said Sumit Sinha.

“If you’re looking to raise your seed or series A round, there are a lot of options. If you are a Soonicorn, if you’re scaled up to a level that you can see line of sight to going public, a large number of private equity firms, both global and domestic, are there to serve your purpose. But there are very few mid-cap growth tech investors out there who are focused on this space,” he said.

In the case of technology services, the firm is looking at some niche areas as well, said Sinha. “We’re spending a lot of time on niche IT services businesses that are leveraging AI to build workflow for customers globally, companies that are doing a lot of data engineering work, where they’re migrating data from traditional on-premise systems to cloud-based data platforms. On the R&D side, we’re spending a lot of time with companies that can build high-quality embedded software for hardware companies in sectors such as automotive and industrial,” he said.

In the AI space, Sinha said, the venture capital fund may not back startups which are trying to figure out new AI-led models, but will look at them once they hit a certain scale.

Nayar, who started the firm in 2018, said the journey of Filter Capital really began when Sinha joined in late 2019. But after that, the Covid-19 pandemic hit in March of 2020 and then the fundraising journey of Filter Capital really picked up in late 2020, early 2021, he said.

“Our first investor anchored us and encouraged us to initially start with the corpus overseas. We were Mauritius-based at that time. We applied for the alternative investment fund (AIF) licence and that took a while and got the approval in 2022. So, our first close of the fund really happened when we combined that overseas vehicle into the AIF in India and raised some capital to do that first close of $40 million,” said Sinha. “A three-year period for a first fundraiser made me quite happy about the outcome,” he said.

Finding the first anchor for some first-time fund managers can actually be quite hard, Nayar agreed. “But once that happens, things tend to snowball quite nicely. And while there were delays associated with getting the AIF in place, the support that we’ve received from the domestic capital ecosystem has been just nothing short of tremendous,” he said.

The fund has so far deployed over 30% of its corpus across four investments. The firm’s current portfolio companies include enterprise loyalty software as a service (SaaS) provider Capillary Technologies, bus mobility platform Chalo Mobility, logistics firm LoadShare Networks, and healthcare enterprise SaaS company THB.

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Published: 08 Apr 2024, 01:07 PM IST