Unitus eyes half of targeted corpus in first close of new fund

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Impact investment firm Unitus Ventures expects to mark the first close of its second fund by raising half of the targeted corpus by August this year, a top executive told VCCircle.

“We are targeting to have raised Rs 150 crore by August and look at the final close of the fund at Rs 300 crore early next year,” said Srikrishna Ramamoorthy, partner at Unitus.

The seed fund will join a bunch of venture capital funds including IDG Ventures, Endiya Partners, Stellaris Venture Partners and Fireside Ventures, which have either made the first or final close of their funds early this year. Most investors who invested in the first fund have committed to invest in the second fund too, Ramamoorthy said. The fund is also talking to new investors, he said.

The second fund will have a combination of institutional and individual investors from both domestic and international markets, Ramamoorthy said.

The first fund, which had mobilised $23 million, invested in 23 companies and currently has 14 active portfolio firms. The bulk of the investment from the first fund was made in education and healthcare firms and the approach for the second fund is expected to be similar. The fund also invested in financial technology, retail and e-commerce, mobile and consumer, and agriculture sectors.

Healthcare bet

Unitus has already charted out a strategy for investments in the healthcare sector from the new fund. Ramamoorthy said the second fund will set aside Rs 100 crore for investments in healthcare startups.

Last month, Unitus hired Milind Shah, former managing director of Medtronic India, as healthcare venture partner to spearhead its investments in healthcare startups. Shah joined Unitus with a mandate to invest in 8-10 healthcare businesses by 2021. Shah said the fund will seek to invest in healthcare startups that have the potential to address the challenges of accessibility and affordability.

“This is an impact fund. So, our focus will be on solutions which impact people in the lower levels of the income pyramid,” said Shah. Startups that are engaged in medical devices or medical technology will be a key focus area for the fund. “These devices could be part of the larger solution in the areas of diagnosis or treatment,” he said.

The fund, Shah said, will also be interested in artificial intelligence (AI)-based startups, which would help in increasing the productivity of healthcare workers; and home healthcare companies, which can help treat patients remotely.

The fund will also explore investments in biotechnology, he said. However, the fund will avoid investments in capital-intensive segments such as drug discovery firms as it does not fit into the seed fund’s approach. The fund will also continue to look at opportunities in the primary care delivery segment, Krishnamoorthy said. “A lot of them would be tech-enabled solutions in these areas,” he said.

Unitus’ investments from the first fund in healthcare include health technology developer UE Lifesciences Inc., pediatric healthcare chain AddressHealth Solutions India Pvt. Ltd and dental clinic chain Smile Merchants.

The impact investment firm will also be open to investing in startups selected under its AmpHealth and StartHealth programmes. Under the AmpHealth programme, Unitus invest in startups which are creating innovative businesses delivering healthcare solutions for the masses in India by providing non-dilutive catalytic capital of up to Rs 1.75 crore to fund immediate pre-commercialisation coupled with upto Rs 3.5 crore of seed capital. Unitus is also running an annual StartHealth programme to offer cash and mentoring to startups in artificial intelligence, analytics, devices and home health segments.

Investment strategy and exits

The second fund will have a typical ticket size of Rs 2-2.5 crore with the flexibility to offer a higher amount depending on the stage of business and the capital the business needs.

“When we started with the first fund, our typical ticket size was as low as Rs 50-60 lakh. But gradually in keeping sync with the market, we have seen our ticket size grow,” said Ramamoorthy. Unitus also expects to see some exits in the next 12-18 through secondary sale or merger and acquisition activity.

“We have had two strong exits from the first fund… In general, exits are not as easy in our market but the trend is changing now,” he said.

This article was originally posted on VCCircle.

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