Infuse Ventures to raise Rs1,000 crore clean tech fund

Industry:    2016-03-29

India’s first venture capital firm dedicated to the clean-technology sector, Infuse Ventures Inc. is raising Rs.1,000 crore to invest in agriculture, healthcare, clean technology and technology for small businesses under a new fund called Bharat, a senior executive at the firm said. Infuse Ventures Inc. is a Rs.125-crore fund formed as a partnership between BP Plc, International Finance Corp. (IFC), the ministry of new and renewable energy, Technology Development Board and the Indian Institute of Management, Ahmedabad (IIMA). The fund has invested about half of its capital in 12 start-ups since its launch in 2013, said Shyam Menon, an investment director at Infuse Ventures, adding that the remainder will be used for follow-on investments in the start-ups within the next six months. Infuse Ventures has invested in firms like Internet of Things start-up Altizon Systems Pvt. Ltd (in which Wipro Ventures Ltd recently invested), energy management start-up Ecolibrium Energy Pvt. Ltd, and recycling firm Karma Recycling Pvt. Ltd. The renewable energy sector is heavily regulated, with frequent changes in rules and differing from state to state, making it challenging for start-ups. Such companies also take longer to give returns to investors, which is one of the reasons why the sector lags in attracting traditional venture capital. Other sectors, such as agriculture and healthcare, that Infuse Ventures is expanding to under the fund also face similar challenges of scale and complexity. Menon said the team at Infuse could bet on such sectors as the firm is a public-private-academia partnership that could focus on start-ups serving demographics beyond the urban elite. For the new fund, the firm hopes to make its first close of Rs.500 crore from domestic institutional investors like banks by the end of the year, said Menon. “Our thesis in Infuse was not around new technologies or research and development. Our thesis was around how we can enable adoption of already existing clean technology,” he said. Start-ups across hardware, agriculture, renewables and affordable technologies will get a chance to secure small seed amounts from the Bharat fund, without losing equity. About Rs.100 crore will be dedicated to providing seed amounts to about 100 start-ups which can prototype and figure out product-market fit, before going in for larger investments. These start-ups need not give up equity in return for the investment. About 20 start-ups from those that receive seed investments will get larger, equity-based venture financing from the rest of the Bharat fund. The fund is going to partner with incubators and accelerators across the country to help the seed companies and provide them access to equipment across institutions for testing prototypes. “We are trying to serve under-served sectors and product management, so you need this ecosystem which the CIIE (Centre for Innovation Incubation and Entrepreneurship at IIMA) brings, which the IIMA network brings, which the public-private partnership model brings,” said Menon. “It might sound unwieldy and too big to take on, but such a concerted effort will create a much better ecosystem for product companies in these sectors.” Although venture funding for solar companies has fluctuated since 2011, investment in wind companies has grown tenfold from 2012 to 2015; seed deals in agriculture technology companies have steadily picked up globally, according to research firm CB Insights. “When you really look at government-based funding, the kind of monitoring that accompanies that, or the kind of value addition that happens after the grant is given, is very little. What is different here is trying to bring the discipline of a VC-approach to this kind of grant funding. The process (of getting funding) will be much more faster because interacting with a company can be a lot more simpler compared to dealing with huge government machinery,” said Thillai Rajan, professor with the department of management studies at Indian Institute of Technology, Madras. He researches the venture capital and private equity industry in India.

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