Axilor Ventures, the early-stage investment firm and accelerator led by Infosys founders Kris Gopalakrishnan and SD Shibulal, has launched a Rs 200-crore (around $30 million) seed fund, a company statement said.
Founded in October 2014, the company will continue to make its pre-seed investments through its accelerator programme.
“We get the feedback from venture capital (VC) funds that the pipeline for pre-Series A and Series A investments is weak or sometimes fluctuates. Some seed funds have moved up as their second fund size got bigger. We hope that we can become a good lead for VCs," said Gopalakrishnan, co-founder of Axilor.
Starting with the current accelerator batch, which is Axilor’s seventh, the company will invest in all the startups that are selected to be part of its cohort. The batch comprises around 20 startups.
While half of the fund will be dedicated to pre-seed investments, the other half will go towards seed stage funding. Seed cheques will be Rs 3 crore or more and pre-seed investments will fall in the Rs 1-2 crore range.
“We will follow the same programmatic approach to seed funding as well by working closely with the startups to improve their traction and customer access, and our network of more than 40 VC funds and mentors. We would like to bring more value than capital," Gopalakrishnan explained. Axilor has made two seed investments and another one is about to be inked, the company added.
The fund will be an alternative investment vehicle with a 10-year lifespan, though Axilor hopes most of the investments will happen within the first 4-5 years. It plans to make around 5-7 seed investments every year, besides putting in pre-seed money in startups from the accelerator batch. Around 90% of the startups that Axilor takes on board for its accelerator programme are bootstrapped at the time of admission.
Around two-thirds of startups from Axilor’s accelerator batches have secured follow-on funding from external investors.
Axilor has thus far made all its pre-seed investments from the family offices of the founding partners. These officially counted as angel investments.
However, the contentious ‘angel tax’ rule created trouble for some startups in general as the angel investment was often received at a valuation higher than that of the fair market value and was treated as income by the tax department and taxed as such.
While a recent government notification has addressed this issue to an extent, Gopalakrishnan said that it was one of the reasons why Axilor considered a new structure. He added that while the Axilor startups have not faced any problems, the new structure streamlines the process and would be easier to operate for VCs, who are looking to invest in the firms subsequently.
Apart from Gopalakrishnan and Shibulal, other Axilor founding partners include former Infosys executive Srinath Batni, Axilor chief executive Ganapathy Venugopal and Tarun Khanna.
Axilor recently opened an office inside Indian Institute of Technology-Madras to forge a deeper connect with academics and research to find and support ventures that are emerging from the institution.