Manu Chandra's Sauce, the VC making a feast of small servings

Consumer-focused investor Sauce VC has scored one of its biggest exits yet, pocketing an estimated Rs 500-550 crore from L'Oréal's acquisition of portfolio company Innovist. The deal validates a strategy built around writing small early-stage cheques and aggressively doubling down on winners.

Manu Chandra, a former investor at British private equity firm 3i Group, founded Sauce VC in 2019 with a modest Rs 60-crore fund backed by his life savings of around Rs 10 crore and a conviction in India's emerging consumer brands. Innovist was among the firm's earliest bets. Since then, Sauce VC has built a portfolio spanning Mokobara, The Whole Truth, Supertails and XYXX, while sticking to its follow-on investment playbook.

In February this year, the firm raised a Rs 750 crore opportunities fund to double down on its winners, placing it alongside larger consumer-focused investors such as Fireside Ventures and DSG Consumer Partners.

“For us, the key has been to concentrate and build returns through concentration. When we find a great company and a founder, we double down and partner with them deeply,” Chandra had told ET in an interview earlier this year.

He declined to comment for this story. ET spoke to multiple ecosystem participants, including Sauce VC's peers and founders, to understand the firm's investment approach. For Chandra, a graduate from IIM Ahmedabad, the focus is to remain disciplined on both cheque sizes and fund corpus.

Philosophy is to stay disciplined & consistent

ET had reported in February that Sauce was looking to raise its fourth fund, but despite outsized returns from earlier vehicles, it will likely be in the Rs 350-450 crore range, broadly in line with its third fund.

“There's a fund I personally look up to — Union Square Ventures,” Chandra had said in his earlier comments. “It ranks among the top-performing VC firms globally, yet across eight or nine funds, it has kept its fund size broadly in the $110-190 million range. Even over the past 15 years, it hasn't significantly increased the size of its vehicles. We want to follow a similar philosophy: stay disciplined on fund size while consistently returning capital to our LPs.”

New York-based Union Square Ventures has backed tech companies such as Twitter (now X), Stripe, Coinbase and Duolingo.

The estimated 8-10x return Sauce is set to make from its Innovist investment puts it alongside some of the biggest consumer investing wins in India. These include Peak XV Partners' 8-10x return on its roughly Rs 100 crore investment in skincare brand Minimalist, acquired by Hindustan Unilever in 2025, and Fireside Ventures' reported 10-12x return on its Rs 25-30 crore investment in Wellbeing Nutrition, acquired by USV Pharma earlier this year.

Investment approach

L'Oréal's acquisition of Innovist values the Gurgaon-based beauty and personal care startup at about Rs 4,100 crore and marks one of the largest acquisitions of a new-age consumer brand in India.

The deal has also put the spotlight on Sauce's model at a time when India's D2C sector has moved beyond the easy-money era. Several brands that raised capital during the 2020-22 funding boom have grappled with rising customer acquisition costs, slowing online growth and the need to build offline distribution. Strategic acquisitions have remained selective, with only a small set of brands delivering significant cash exits for early investors.

“The real challenge is that most generalist VCs are more tech-oriented,” said Hariharan Premkumar, managing director and head of India at DSG Consumer Partners. “They underwrite businesses with a focus on growth and outsized outcomes. In the consumer space, the discipline is different. You have to balance fundamentals with growth because consumer businesses do not grow exponentially like tech businesses.”

DSG Consumer Partners and Sauce VC are common investors in XYXX and Supertails.

“Manu is very high-conviction,” said Premkumar. “In many of his portfolio companies, he has invested in multiple rounds. In this space, it is important to have conviction not just on the first cheque, but also on subsequent cheques.”

Another key element of the strategy is specialisation.

“Having a focus in a specific sector, like what we are doing at Fireside and Manu is doing at Sauce, brings a lot of positive value,” said Kanwaljit Singh, founder and managing partner at Fireside Ventures. “It helps in understanding the drivers of growth and navigating the journey of a company along with founders across stages. It also creates value when you aggregate a cohort of companies while talking to partners across media, distribution and other channels, helping negotiate better commercials and get more support from larger ecosystem partners.”

Getting off the ground

“Sauce launched its first fund just before Covid,” said a person who has worked closely with the firm. “By then, India's consumption story had already taken shape to some extent, but there was still significant headroom for growth, with several niche categories waiting to scale. Manu spotted many of these opportunities early, and the firm's initial bets helped validate that thesis.”

The first investors included people in his personal network.

“Most of Sauce's early LPs were people Manu knew personally, including founders such as Ankit Chona of Hocco Ice Creams and the late Rohan Mirchandani of Epigamia,” the person said. “For the most part, the firm has raised capital from domestic institutions and family offices, although its latest opportunities fund also attracted overseas LPs.”

Sauce's approach has been to write small early-stage cheques and back breakout companies with larger follow-on investments.

The thesis rested on a broader shift in Indian consumption. Younger consumers were discovering brands through Instagram, ecommerce, influencers and, later, quick commerce. Categories such as beauty, personal care, food, apparel, wellness and lifestyle saw challenger brands take on incumbents through sharper positioning, better packaging, faster product cycles and digital-first distribution.

“This (Innovist) is not a unicorn outcome, but the founders have made great money and Manu has made great money. Consumer businesses need a different lens in terms of how they should be built,” Premkumar said. “Around 80% of consumer exits are strategic rather than IPO exits. I don't see that changing dramatically because incumbents in consumer have historically innovated through acquisitions.”