Nilekani teams up with Helion's Sanjeev Aggarwal to set up VC firm to fund mid-stage startups

BENGALURU: Infosys co-founder and Aadhaar architect Nandan Nilekani is teaming up with venture capital investor Sanjeev Aggarwal to set up an investment firm that will back midstage startups, according to four people aware of the plans.

The fund, with a corpus of at least $100 million, will consist mostly of personal capital pooled in by the technology titans, who made their fortune in India’s outsourcing boom. The rest will come from “friends and family”, the sources said.

“Nandan and Sanjeev are expected to contribute 30-40% of the corpus, and they are also looking to rope in a third partner,” said one of the people cited above.


Nilekani and Aggarwal did not reply to email queries and text messages.

In a departure from venture capital industry practice, the fund — whose name could not be ascertained — will not pay 2% of the total corpus as annual management fee to fund managers, said the people cited above. The eventual fund size could vary between $100 million and $150 million, these people added.

Nilekani, who unsuccessfully contested the 2014 Lok Sabha elections after stepping down as chairman of the Unique Identification Authority of India — has since emerged as a prolific startup investor. Estimated to have a net worth of $1.7 billion, according to Forbes, the 61-year-old has backed over half a dozen startups in the past year. His biggest bet so far is a $10-million investment in ShopX, which builds technology for small retailers.

Industry observers feel Nilekani, who has chosen to back startups that solve local problems, could direct the investment pattern of the new fund in a similar direction.

Aggarwal is the cofounder of Helion Venture Partners, which manages a corpus of over $600 million. The fund saw a split last year, when three of its partners left to float investment firm Stellaris Venture Partners. Since then, Helion has put on hold plans to raise a new fund.

Before he helped set up Helion, Aggarwal was the founder of business process outsourcing firm Daksh, which was acquired by IBM for $150 million in 2004.

The new fund will seek to gain from Aggarwal’s successful track record as a series B investor, having backed companies such as grocery portal BigBasket, online marketplace ShopClues and travel portal MakeMyTrip.

ET was unable to ascertain if Aggarwal would quit his position at Helion to set up the new fund.

Nilekani and Aggarwal’s decision to pool domestic capital for late-stage investments is being seen as a sign of maturity in the Indian startup sector, where there is an abundance of early stage money from angel investors and venture capital firms.

“This indicates a sort of maturing of the ecosystem, and in this aspect we are following China,” said Rutvik Doshi, director at venture capital firm Inventus. “It also reduces reliance on foreign investors, who sometimes go by the swings of macroeconomic thesis,” he added.

Crowdfunding platform LetsVenture estimates that just nine out of all the startups formed in 2010 have been able to raise series B, or late-stage, capital so far. While 28 startups from the cohort of 2014 have received series A funding, just three have been able to raise series B capital.

“It’s a very interesting strategy. I think there is a massive series A and B crunch in the market right now,” said an investor who confirmed the news about the fund but requested anonymity.

Large venture funds such as Accel India and Nexus Venture Partners focus on seed and series A deals, though some new ones like Zodius Capital and Iron Pillar are mobilising domestic capital to focus on series B funding. Several global venture capital firms like Sequoia Capital, Norwest Venture Partners and Bessemer Venture Partners are also active series-B investors.