Evolvence India courts domestic LPs for its largest fund yet, eyes $300 million
Mumbai: Evolvence India is gearing up to raise its fifth fund, targeting a corpus of $300 million, including $100 million from Indian investors, according to managing partner Ajit Kumar.
The firm also has the option to expand the fund size through a green shoe provision, marking a strategic shift as Evolvence actively courts domestic investors amid evolving global funding dynamics, Kumar said in an interview with Mint.
'In the past, we raised capital from investors in the US, Europe and the Middle East and now we are also considering a domestic tranche," Kumar said, adding that the firm plans to raise about $100 million from Indian investors, with the remaining coming from international limited partners (LPs).
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Evolvence expects to complete the first close within the next few months, according to Kumar.
The shift comes amid challenges faced by US investors, who are grappling with historically low distributions due to reduced public market valuations. High interest rates have also hampered dividend recapitalizations, NAV loans, and subscription credit, leading to limited cash returns.
Compounding this, tepid M&A activity and fewer initial public offerings (IPOs) have constrained liquidity. Consequently, first-time capital raisers and smaller funds in the US are finding it difficult to attract investments, as roughly 80% of available capital goes to larger funds, Kumar explained.
India, however, presents a more promising outlook, Kumar noted, with 'pockets of interest" in the early growth stage where Evolvence operates.
Evolvence typically writes cheque sizes of $10-20 million, primarily targeting early-stage growth companies. This aligns with the firm's focus on bridging the gap in mid-market funding in India, especially during critical expansion phases.
Sectors include consumer, financial services, healthcare, SaaS, specialty manufacturing, and precision engineering–industries that have demonstrated resilience despite the broader funding slowdown.
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Evolvence, which has raised over $700 million across four funds, has invested in more than 25 startups through direct and co-investment opportunities. Notable investments include Captain Fresh, Veritas Finance, Renee, HomeLane, and Capillary.
While the bulk of Evolvence's investments target Series A and follow-on rounds, around 30% of its capital is allocated to other Indian private equity and venture capital funds, including through secondaries, a strategy Kumar said helps diversify exposure while maintaining focus on mid-market companies.
Barring the second fund, which closed at about $70 million during the financial crisis, Evolvence has largely capped its previous fund sizes between $200-250 million. The fifth fund would be its largest to date.
Despite the larger corpus for its fifth fund, Kumar emphasized that Evolvence remains focused on the early growth stage in India, where it sees a gap in mid-market funding.
Kumar prefers fund managers with consistent strategies so that do not drift away from their original style and focus on investments. 'We currently see fewer managers in growth capital area where they can write cheque sizes of $15-30 million in India," he added.
The new fund launch aligns with a broader revival in fundraising activity among Indian private equity and venture capital players. Over the past six to eight months, several firms, including Kedaara, ChrysCapital, Stellaris Ventures, Prime Ventures, Accel, A91 Partners, Cornerstone VC, and Bessemer Venture Partners, have announced new funds.
Others, such as Blume Ventures and India Quotient, plan to retain their current fund sizes, while Peak XV recently cut its $2.85 billion India and Southeast Asia fund by $465 million to reduce costs.
Also read | Are Indian venture capitalists investing in moonshot ideas?
While India recorded a banner year in domestic fundraising in 2024, caution remains. Bain & Company recently noted that despite increased commitments from global and government-linked investors, funds will need to demonstrate robust operational value creation to secure backing. Heightened scrutiny around performance and track records will continue to shape investment dynamics in the region.
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