Ventureast eyes first crypto bet as regulations become clear


Back in 2019, Ventureast Fund Advisors India Pvt Ltd, a backer of insurtech unicorn Acko, had worked on the idea of ​​raising a cryptocurrency fund where commitments would come in the form of cryptocurrencies.

“We went around various parts of the world looking at cryptocurrencies from a regulatory and technology perspective, and we also received initial commitments (to the fund),” Sarath Naru, managing partner at Ventureast, told VCCircle in an interview. “We eventually abandoned the plan for the crypto fund due to two major corrections in the crypto market that year.”

However, Ventureast, one of the oldest venture capital firms that has been investing in India since 1997, is set to make its first cryptocurrency investment this year.

“Cryptocurrency is our personal favourite. We are keeping a close eye on the space,” he said without elaborating on the potential startup he intends to invest in.

However, he added that he now does not feel the need to create a separate cryptocurrency fund to make investments in the space, as the idea of ​​cryptocurrencies is becoming more mainstream in India.

Last year, India witnessed the rise of two cryptocurrency unicorns, CoinSwitch Kuber and CoinDCX despite regulatory uncertainty. Unicorns are private companies with a valuation of at least a billion dollars. Also, in a positive turn of events for the industry, the Indian government recently announced in the Budget a proposed tax rate of 30% on income from virtual assets.

While the tax rate is largely seen as lofty, he noted the government’s recognition of the country’s cryptocurrency industry.

The venture capital firm’s first cryptocurrency investment will be made from its existing technology-focused vehicle called the Ventureast Proactive Fund II that had raised more than $80 million.

Naru said the fund is still dry dust and he intends to make three to four new investments this year, as well as follow deals. “The fund will be fully committed by the end of this year,” he added.

He also noted that in addition to cryptocurrencies, digitization in the edtech, health, and fintech segments has been proliferating. “You will see us playing big B2B2C in education and healthcare,” he said. B2B2C is short for business to business to consumer, with startups targeting both segments.

In general terms, Naru explained, Ventureast will continue to seek investments in the small and medium-sized enterprise (SME) segment with technology as a differentiator.

“We remain attached to what we are good at: focusing on the underserved market. It’s not about the technology, we look at the market first and then we look at the technology,” he added.

In 2021, Ventureast’s new investments included software-as-a-service (SaaS) platform, deep tech startup Cron AI, and auto repair and service provider Pitstop. It also made about six follow-up inversions, Naru said. Notably, his portfolio firm Acko also entered the coveted unicorn club last year after raising $255 million as part of its Series D round led by private equity firms General Atlantic and Multiples Private Equity.

Last year, Ventureast was also in the news for his exits. It completely exited Richcore Life Sciences and Indus OS and partially exited PerPETual Global and MoEngage.

However, Ventureast was also involved in a legal dispute related to its departure from Indus OS. It started with Walmart-owned PhonePe’s decision to acquire Indus OS in the middle of last year. Following this, Indus OS’s current investor, Affle Global Pte Ltd, stated that it has no inclination to support the $60 million ‘low’ PhonePe offer. After, PhonePe filed a lawsuit against Ventureast and Affle in the Singapore High Court and also filed a lawsuit with the market regulator SEBI (Securities and Exchange Board of India) against the venture capital firm.

The matter is still in court, Naru said without elaborating.

Also in 2022, Ventureast is considering about five full and partial exits. Two of the exits are expected to happen via the initial public offering (IPO) route. His organic packaged food company, Sresta Natura Bioproducts, has already filed draft documents with the market regulator for an initial public offering, and Ventureast is expected to sell a significant portion of its stake in the process. It is also expected to come out during the IPO of its healthcare company, which will soon file preliminary documents, Naru added without revealing further details.

Meanwhile, Ventureast is also expected to promote from within and hire at a leadership level this year as it looks to create a more sustainable and vibrant management structure.

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