Elevation Capital raises $400 million late-stage fund to back IPO-bound startups

Venture capital firm Elevation Capital, which has backed the likes of Paytm, Swiggy, Meesho and Urban Company, is moving beyond its core early-stage investment focus with a new $400 million vehicle designed at taking long-term bets on companies that it believes will create value in public markets.

The late-stage vehicle, called Elevation Holdings, will invest in 10-15 companies with cheque sizes ranging between $20 million and $50 million, Elevation Capital co-managing partner Mukul Arora told ET.

The move comes amid a fundamental reset in Indian venture capital as large pools of private growth capital have dried up, forcing startups to increasingly look to the public markets for scale and liquidity.


Arora told ET that the new fund will primarily back companies in the consumer and financial services segments with a technology focus.

He, however, said Elevation Holdings is different from typical growth vehicles at various VC firms which have become popular over the past few years.

“Our horizons for investments are much longer and we will hold long enough to be considered permanent holders of the stock. We also have the flexibility in terms of having a non-intrusive cheque size for a company of that scale,” said Mridul Arora, partner, Elevation Capital.

“Also, while these investments are at a late stage, we are bringing our venture DNA to the fore. For a lot of founders at that stage, a lot of interactions are with typical public market investors, a lot of whom are worried about the next quarter or the next year. But we would be great partners to think about the longer term,” he added.

Funds like Accel and Peak XV (formerly Sequoia Capital India) operate separate growth verticals to back mature companies.

Elevation Holdings will operate in parallel to its Fund VIII, a $670 million early-stage vehicle that backs startups by investing $2-5 million.

“There is now greater confidence in fundamentals of the companies getting created. If you look at traditional Indian businesses from the last few decades like Asian Paints, HDFC Bank or Titan, they have compounded year after year, decade after decade…this is for the first time, we feel that there are some companies in our technology ecosystem that can reach that level of maturity,” Mukul Arora said, adding that Elevation Holdings will hold stakes in these companies for more than 10-15 years.

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Elevation Holdings will look at companies that are not more than three years away from going public, and are either profitable or have a clear line of sight to profitability, he said. The new fund has already invested in used-car marketplace Spinny.

Mukul Arora said the fund’s mandate isn’t limited to Elevation Capital’s existing portfolio and could also extend to backing external startups.

Mridul Arora said companies such as Meesho, Swiggy and Urban Company would have been likely candidates if this vehicle existed a few years ago. He said Elevation Holdings could pick stakes in late-stage companies through either primary or secondary transactions, including purchase of stock options from employees.

Also Read: Startup IPOs by default, not design

Broader VC reset

In the absence of late-stage funds that fuelled billion-dollar valuations, VCs are creating specialist vehicles to stay invested in companies closer to profitability and market listing. Elevation Holdings is emblematic of this shift, positioning itself where private equity and crossover funds have traditionally dominated.

Elevation joins several secondary-focused funds that have sprung up in recent years. They include the likes of former Peak XV Partners MD Piyush Gupta’s Kenro Capital; Oister Tribe Ace Fund – a $500-million joint-venture fund between Oister Global and Tribe Capital; Neo Asset Management’s Rs 2,000 crore secondaries focused fund; and the Rs 400-crore vehicle by PixelSky Capital, a secondaries fund founded by boutique investment bank IndigoEdge and entrepreneur Hitesh Ahuja.

The trend has gathered momentum as more new-age companies turn to public markets for capital and shareholder exits. Already this year, Ather Energy and BlueStone have gone public, while at least a dozen others including Lenskart, PhysicsWallah, Groww, Pine Labs, Curefoods and Boat have filed their draft papers. Elevation Capital’s portfolio companies such as Meesho, Urban Company, Wakefit and Aye Finance are also in the queue to list on local exchanges.

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Elevation Capital, known for limiting its fund sizes even when its peers were raising record amounts for their vehicles, has taken a deliberate call to keep a $400 million corpus for its late-stage vehicle.

“It's very deliberate…we want to be more discerning and would rather invest in 10-12 really concentrated and highly rated companies than increase fund size and create that pressure on us,” Mukul Arora said.