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In the year 2010, Rema Subramanian and Ritu Verma travelled across India to understand the changes taking place in the country. This journey helped the duo set the tone for their early-stage venture capital (VC) firm—Ankur Capital.

“There were a lot of highways that were being built in 2010 and internet penetration was increasing. We also saw initial shoots of science-led entrepreneurs,” Rema, Co-founder of Ankur Capital tells YS.

In 2014, Rema along with Ritu Verma launched Ankur Capital. Headquartered in Mumbai, the VC firm backs science-driven startups solving real-life challenges through digitalisation.

Rema says, “We believe that the next wave of growth would come from first time users of the internet and sectors that were untouched by digitalisation.”

Ankur Capital is now set for a bigger stage as it prepares for its third fund with a size in the range of $125-150 million. Its earlier funds were in the sizes of $8 million and $52 million, respectively.

The first close of the new fund is expected by the end of this year or early next year to the tune of $60 million. Ankur Capital’s existing investors, which include CDC Group, Dutch Good Growth Fund, BIRAC, MacArthur Foundation, and Small Industries Development Bank of India (SIDBI), as well as new entities will invest in the latest fund.

Investment focus

The VC firm’s focus has primarily been on agritech, healthtech, edtech, and fintech, especially on startups that have built a deep technology layer to solve large problems.

For example, one of its portfolio companies is CropIn, which leverages technologies such as artificial intelligence, machine learning, and remote sensing to improve agriculture yields. Ankur Capital has also backed Niramai, a breast cancer-detecting platform leveraging deep tech in a non-invasive manner as well as biotech startup String Bio which uses biotechnology to produce animal feed and food ingredients in an environmentally friendly and cost-effective manner.

According to Rema, Ankur Capital’s portfolio has several science-backed startups, a category that many investors shy away from. “We have invested in category-creating startups and this has come out through our thesis as well as experience,” Rema adds.

Ankur Capital has so far invested in about 24 startups from both Fund I and II. The quantum of funds it invests in each startup ranges from $500k-$5 million.

In the third fund, it will look at investing in around 20-25 startups and the investment amount per startup could go up to as much as $8-10 million.

According to Rema, many of its portfolio startups like Captain Fresh and Rupifi have gone on to raise the next round of funding.

Now, Ankur Capital is looking for the next round of action with its third fund. It will continue to focus on technology-led startups, the co-founder says. Within the deep science startup, Ankur Capital will also explore climate tech startups.

On the digitalisation front, Ankur Capital believes there are many segments of the economy that are underpenetrated such as the supply chain in agriculture, construction, and the labour industry.

“We always look at segments which are not touched deeply with technology,” says Rema.

The co-founder says Ankur Capital believes in remaining invested in a startup for a longer period of time as “It takes time for any innovation to take root.”

Tracking growth

Rema says the first fund generated an internal rate of return of 40 percent, with the bulk of exits expected to come next year. Even the second fund generated a high IRR, she says, without disclosing details.

According to the co-founder, India’s startup ecosystem requires different kinds of risk capital where the exit point for each investor would be different.

In the early stage of startup investment, risks are associated with product and market adoption while in the growth stage, risks are linked to management bandwidth and scaling.

“We will take different exit points depending upon how we assess the risks and the evaluation of returns,” says Rema.

Rema is a cost accountant by training who has worked in the education and IT/ITeS industries and has experience in scaling companies. Ritu has a Ph.D. in Physics along with an MBA and worked with corporates such as Unilever and Philips.

Ankur Capital’s third fund comes at a time when India’s startup ecosystem is preparing for a slowdown of capital. Companies are now focussing on metrics such as profitability and sustainability.

Rema believes the funding slowdown will have a greater impact on the growth-stage companies rather than on the early-stage startups.

“India still has large pockets of definitive opportunities where there are real problems waiting to be solved,” says Rema.