To fill a void in the mid-stage funding space, venture capital firm Iron Pillar is trying to make a niche for itself by providing growth capital at the Series B to Series D stage.
Founded in early 2016, the VC firm has so far backed NowFloats, BlueStone and Servify and with the recent closure of its $90-million maiden fund, Iron Pillar is gearing up to pick up the pace and close two deals by year-end. Subsequently, it plans to invest in at least one company every quarter.
The six-member Iron Pillar founding team includes former Morgan Creek executive Anand Prasanna, former Citigroup India executives Sameer Nath and Harish Hulyalkar, former DFJ India head Mohanjit Jolly, former DBS executive Ashok Ananthakrishnan and former Xander Group executive Ashish Shah.
The fund recently partnered with global investment network Draper Venture Network to help gain global access for its portfolio companies as well as for Iron Pillar.
In an interview with DEALSTREETASIA, Harish Hulyalkar, Partner at Iron Pillar talks about the partnership with Draper network and China’s Fosun, as well as clearing the air about its reported investment in Snapdeal.
What is Iron Pillar’s investment strategy?
We are a venture growth fund that straddles Series A and late-stage rounds of funding. When we started out as six partners, we realised early on that there was plenty of capital at the early venture stage and there was plenty of capital available once you were raising over $50 million. But, at the mid-stage, when companies are raising between $10 million and $50 million, there weren’t many funds in India who could lead those rounds. A lot of companies were finding it challenging to raise capital because of that, and the companies had to either prematurely sell themselves or consolidate with other players, or do things that otherwise they wouldn’t have, had there been no lack of capital. There aren’t a lot of players in this space, and now a few funds are coming in with a similar strategy as ours, which validates our belief. We invest in Series B through Series D opportunities with $10-50 million round sizes. We initially invest $5-7 million and keep some reserves for follow-on rounds.
Can you elaborate on the relationship with the Draper Network?
Because we provide growth capital, neither are our companies very early nor very mature in their evolution, so besides our capital, they need connections to a global network to help them grow. The power of a global network is several multiples that of the individual network of the six partners of Iron Pillar. That is one clear benefit that we see for our portfolio companies, in terms of getting access to the 22 venture funds across the globe within the Draper network, for their growth aspirations. The network will also help from an exit or a capital raising perspective, since it’s important that the companies get access to the right set of investors when they go for subsequent round of investing; sometimes the right set of investors may not be based in India. That’s another role that DVN can play. Also, from our Fund’s perspective, it
gives us access to LPs and an investor network that we can tap into, although that is not the primary objective.
Draper also has a partnership with Blume Ventures in India, is there any overlap?
Blume is an early-stage investor, so typically there would be at least one more investor between Blume’s investment and ours. Early-stage investors like Blume would have 70-80 companies in their portfolio while we would have 8-9. The requirements when the company is young and starting out are different, whereas we come in at a later stage of the company’s life cycle, when the company and the product are quite well established. So, even if Blume and us decide to tap into the Draper network, it would be at different stages and for different reasons.
What is the status of your strategic partnership with Fosun? Does that clash with your partnership with Draper Network?
The partnership with Fosun was never a part of the fund. It was a side pocket vehicle available to us, to co-invest in large deals, north of $50 million, where we would ordinarily not be able to participate. While we’ve looked at a few opportunities, we haven’t done a deal with Fosun yet. The Fosun partnership is totally different from our partnership with Draper, because Draper is a network that we are a part of, and none of the Draper network firms invest in our deals, while the Fosun partnership is an ability for us to participate in larger deals if we wish.
What is the deal flow like in the level at which you operate-Series B to Series D? Are you benefiting from the fact that there was a boom a few years ago and now only the best have survived for you to consider?
We have been tracking this space for some years now. At any point in time, if you take the top 15-20 VCs in the county who fund Series A and pre-Series A rounds, there are about 250-300 companies that have raised a Series A round and around 100-150 companies that have raised a Series B round. So at any given point, there are about 300-400 companies which are exactly in our sweet spot. These are the highest quality companies that we can get to see, and within this universe, we have to pick 8-9 companies in our first fund. So the supply of companies is way more than the number of funds who are looking to invest in these companies.