Nilekani

Ashish Kumar, founding partner, F2A BENGALURU: Nandan Nilekani-backed Fundamentum’s third fund has secured Rs 3,000 crore from investors and increased its fundraising ceiling to Rs 3,500 crore following strong demand, as the venture capital firm prepares to make larger bets on Indian artificial intelligence and deeptech startups.The fund, managed by Fundamentum Frontier Advisors (F2A), is led by Fundamentum co-founder Ashish Kumar. In an interview with TOI, Kumar said the firm has already closed the Rs 3,000 crore and is negotiating with institutional investors to raise another Rs 500 crore. It expects to complete the final close within the next two months.About 70% of the capital has come from Indian investors, largely family offices, while overseas investors account for the remaining 30%. Nilekani is the fund’s anchor investor and mentor.F2A plans to invest Rs 100-200 crore each in 12-15 companies over the next two to three years. It is already in advanced discussions to close three investments this quarter, with the first announcement expected as early as this month or November.The fund’s larger cheque sizes reflect a decision to take bigger stakes in companies rather than a rise in startup valuations, Kumar said. F2A had earlier indicated investments of Rs 50-150 crore.“We will take more of the round,” he said, adding that the fund also wants to invest more in subsequent rounds as its portfolio companies grow.Kumar believes India’s growth-stage deeptech market remains significantly undervalued compared with more developed markets. “Series B deeptech in India is a mispriced asset,” he said, estimating that comparable companies in Western markets could command valuations three times as high.He attributed the gap partly to a shortage of domestic investors capable of leading large funding rounds. While early-stage deeptech funds have multiplied, few have the capital required to lead Series B investments, he said.According to Kumar, India currently has more than 50 deeptech companies that have reached a stage where they could attract Series B funding. These include around seven robotics companies, seven to nine semiconductor startups and another eight or nine businesses working on data centre infrastructure, including cooling, power and energy systems.He estimates that another eight to 10 companies are reaching this stage every quarter.Unlike conventional software startups, deeptech companies do not necessarily need substantial revenue to qualify for growth-stage funding, Kumar said. Instead, investors look for developed technology, an identifiable commercial use case and at least one reference customer.The fund will invest across consumer AI, enterprise software and deeptech infrastructure, including robotics, semiconductors, quantum technologies and advanced materials.Kumar also pointed to an emerging trend of experienced Indian technology professionals returning from the US to build deeptech businesses in India.Of F2A’s three proposed investments, one involves a company originally established in the US that is shifting its domicile to India. Another involves founders returning after working overseas.“It’s almost the second reverse brain drain happening,” Kumar said, comparing the trend with the return of Indian professionals who helped build the country’s technology and financial services businesses two decades ago.He said access to larger pools of domestic capital could also help Indian founders retain intellectual property and build their companies locally rather than moving overseas for funding.F2A is led by three general partners: Kumar, former SIDBI Venture Capital executive Debraj Banerjee and Vivek Singla. The firm will focus on companies that have validated their technology and are ready to expand commercially, including into overseas markets.You use AI every day. Now get your AI Quotient. Take the AIQ test.