Lightspeed Venture Partners to increase its focus on growth deals

Mumbai: Early-stage investor Lightspeed Venture Partners, which has backed startups including Byju’s, Oyo, Udaan and ShareChat, will focus more on growth deals and has put in place a dedicated team to scout for such opportunities, senior executives at the venture capital fund said.

Growth-stage investments typically come after a startup’s first few rounds of funding.

Lightspeed has scaled its capital base to tap a larger set of companies, the fund said.

“At the early stage, it is somewhat inevitable that we will miss investing in compelling founders and companies, either because we didn’t see those opportunities at the seed or Series A stage, or because we failed to appreciate them fully. By scaling our capital base, we are able to invest in some of these exceptional companies and founders slightly later in their lifecycle,” Bejul Somaia, partner, Lightspeed, told ET in an exclusive interview.

“This isn’t new for the firm globally or in India. What is new is that we’ve formalized and expanded the effort and now have a dedicated team that is executing against this strategy,” he added.

Lightspeed’s other investments in India include Darwinbox, Yellow Messenger, OK Credit, Apna, Dukaan, and Teachmint.

In 2020, Lightspeed India mopped up $275 million from limited partners (LPs) or sponsors, for its third fund to invest in the country.

Before that, it raised $180 million for Fund II and $135 million in its maiden India-dedicated fund in 2015.

Having been active in India since 2007, Lightspeed has invested $1.5 billion here while clocking returns from companies such as IEX (IPO), Oyo, Tutorvista, among others.

Lightspeed is eyeing a larger global growth fund to invest in companies across markets including India and Southeast Asia. It is likely to hire more people in its India office to execute this strategy.

“We are going to grow our team size this year and expect to have a full-fledged team of eight people focused on India and Southeast Asia by the end of the year,” said Aditya Sharma, partner and head-growth investments in India, at Lightspeed, who joined the firm in May last year after a 12-year stint at global private equity firm TA Associates.

Blue-chip VC funds like Sequoia Capital also have separate growth teams in India, which focus on more mature startups.

Lightspeed is in the process of raising a larger global growth fund, though Somaia and Sharma refused to divulge details.

In 2021 alone, the firm utilised around $300-$350 million to back growth stage new-age companies in the country such as Zetwerk, Hubilio, ShareChat, CredAvenue and Acko Insurance. The firm invested in 50 companies overall last year across India and Southeast Asia.

The growth platform invests out of two global growth funds.

“We have the early growth funds that target $30-$75 million in cheque sizes while our late-stage growth funds target between $75-$200 million investments. In 2021, we invested over $300 million from the growth platform in India where the smallest cheque was in the $25 million range and the largest was a little north of $100 million,” Sharma said.

According to him, the firm will actively explore opportunities in sectors such as healthcare, ed-tech, fintech and Software as a Service (SaaS).

“Some growth-stage investments were into net new companies that we would have missed investing in early on, while some are our own venture backed businesses where they’ve evolved to a certain phase in their journey and we want to keep supporting them as they raise larger funding rounds,” Sharma added.

As firms tap into larger pools of capital from their LPs, there is a need to invest in and back high growth companies through a longer time frame. While some firms are raising capital for growth deals, some are taking very early bets. Firms such as Chiratae Ventures, Accel, Sequoia India, and Blume Ventures have started programmes to tap startups at even idea stages.

Indian startups snagged $34.7 billion in VC investments across 1,070 deals in the previous calendar year (2021), according to Venture Intelligence.

On this aggressive funding environment, Somaia said: “You only find out many years later which decisions worked out and which didn’t. And when you look around, there are a lot of very bright, informed people making very different decisions.”