IvyCap Ventures has garnered INR 1,608 crore ($214 million) from institutional investors in the first closure of its third fund.

According to an IvyCap executive, the fund has attracted banks, insurance companies, mutual funds, family offices, and government agencies. According to sources familiar with the matter, the fund's sponsors include State Bank of India, Life Insurance Corporation of India, and HDFC Life.

This is the fund's first contribution from an Indian family office.

IvyCap plans to grow the fund, which will invest in early-stage companies, to as much as INR 2,500 crore, making it one of the largest pools of rupee capital in the country.

It will also join the rising number of venture capital (VC) funds raising cash from Indian limited partners, or sponsors.

Purplle, a beauty goods etailer, Bluestone, an e-commerce platform for jewellery, and Bewakoof, an online clothes retailer, are among the firms that IvCap has sponsored thus far.

IvyCap's founder and managing partner, Vikram Gupta, “As we grow in size, our competitive landscape changes substantially. Now we are competing with Sequoia Capital, Accel...others. These are funds that come with substantial fund sizes, and you don't want to lose out on deals only because somebody thinks that others can provide them with a larger follow-on capital.”

He noted that the new funding will enable it compete more effectively with larger funds and avoid stake dilution in current businesses.

A91 Partners, Stellaris Venture Partners, Sixth Sense Ventures, and 3one4 Capital, among other Indian firms, have raised significantly larger follow-on funds amid a surge of money following new-age businesses.

In 2014, IvyCap created its first fund, which had a corpus of INR 240 crore and invested in ten firms, and its second fund, which had a corpus of INR 535 crore, was more than double the size. Fund II, which began operating in 2020, has invested in 23 companies.

He said, “We have seen from our own experience when companies start scaling and raise more funds our stake in the company comes down. We start with 30% and it comes down to 14%. That is an opportunity lost.”

In addition, Fund-III will set aside about 20% of the corpus for co-investing in its current Fund-II portfolio, with the remaining cash set aside for follow-on rounds throughout the whole portfolio.

IvyCap presently maintains a portfolio of over 30 companies and has departed six of them, including a partial exit in Purplle last year, where it received a 22x cash return on its Fund-I investment.

The VC Company stated in a statement that it will continue to focus in sectors such as consumer technology, deep tech, healthtech, SaaS, fintech, and ed-tech with Fund-III.

Gupta explained that the company's investment strategy is to invest mostly in Series A rounds, with cheques ranging from INR 25 to INR 40 crore being cut.

He added, “Unicorns will look good on your portfolio, but it does not tell you how much return it has given. We are very return-focussed in that sense and don't have a single unicorn in our portfolio. But the kind of returns we have generated is substantial.”

IvyCap was the first VC Company to develop a "dragon" in the portfolio, according to Gupta, pointing to its investment in Purplle.

A dragon, according to him, is a corporation that provides a cash return greater than 1x the fund's total size.

When asked about the early signs of a funding slowdown and sobering of valuations, he said, "We are already seeing realistic expectations on valuations in the minds of entrepreneurs given the recent corrections in the market. This will help us make investments at the right entry levels ..."

IvyCap, which was founded in 2011, has established a venture financing strategy centred on the worldwide IIT alumni community. The founding team also includes Vishal Gauri, Ashish Wadhwani, and Anju Gupta, in addition to Gupta. Several IIT directors have joined the business as consultants to companies in which the fund invests.