Equirus InnovateX Fund

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About Company

Equirus’s PMS is India’s one of the best performing portfolio management services out of 35 PMS providers operating for more than 3 years across the whole country and who have an AUM greater than 900 Cr. Equirus PMS Investment philosophy is based on the synergies of value and quality. They invest in relatively undiscovered businesses with long growth potential. To qualify for their portfolio, companies must have the several qualities most relevant to long-term growth-qualities recognized and rewarded over time by investors and be selling at a price below their intrinsic value.

Fund Snapshot

Fund Type Category I Venture Capital Fund
Fund Size INR 150 Crores
Check Size INR 4-7 Crores
Fund Term 7 Years + Extension of 2 years
Target Number of Investments 15-18
Portfolio Upto 20 companies with max exposure at 25% of the Fund
Sponsor Commitment 2.5% at par with the statutory requirements
Management Fee 2% per annum
Hurdle 8% with catch up

 

Carry 20%
Setup Upto 1%, based on actuals

 

Fund Expenses Upto 0.5%, based on ac

 

Min LP Commitment INR 1 crore

 

Fund Overview

The fund’s vision is to find substantial leaps in technology with solid new business models, great monetization strategies & proven growth teams in large addressable markets.

Key Drivers Propelling India as a Leader in Technology Adoption

Rapid Digitization

  • 1 billion people use mobiles and over 50% use smartphones in India
  • Over 1 billion smartphone users by 2026
  • Covid has increased digital sales in both goods, services, and software
  • Demand for tech solutions that foster transformations is rising across sectors

Ease Of Doing Business

  • India ranked 63rd in 2022 (142 in 2014) in ease of doing business among 190 countries
  • Primarily due to trade and taxation regulations, infrastructure, and technological readiness.
  • Policy reforms such as Make in India, Digital India, India Stack, EV policy, Drone regulations, ISRO’s space push, etc. will support the next decade of growth in technology

Data

  • India’s Personal Data Protection Bill, 2022 provides for collection, storage, processing, transfer and regulation of personal data
  • GOI’s goal is to protect the data of its citizens through data localization
  • India’s vast data resources, along with government initiatives and data protection laws will propel the country’s efforts in the AI race

Focus On Profitability

  • Companies are focusing on profitability largely due to drop in funding, valuation premiums, and an overall market slowdown
  • Managements are investing in digital transformation, and innovation to reduce costs, improve efficiency, and drive growth
  • The adoption of AI in India is expected to lead to an increase in India’s GDP by 1.3% by 2030

Friend Shoring

  • The international order is straining to with US & China in a tariff war and Ukraine invasion leading to sanctions on Russia
  • Companies are choosing resilience over efficiency
  • India possesses the scale, talent, and resolve to be the ideal offshoring destination. India is the prime candidate for the China+1 strategy

Middle India

  • Tier 2 & Tier 3 towns have emerged as centers for IT and IT-enabled services
  • Ahmedabad and Kochi lead the Tier 2 cluster with a large talent base and medium maturity
  • Bhubaneswar and Vadodara lead the Tier 3 cluster and low market maturity for IT and BPS
  • As Metros and Tier 1 cities near saturation, Tier 2 and 3 cities will be the new locus of growth

Investment Themes

Software & SaaS

  • Market: Expected to reach $13.1 billion by 2025, up from $6 billion in 2019
  • Growth Drivers: Increasing adoption of cloud solutions, corporate focus on profitability and efficiency, and the rising digital transformation 
    • Indian has become a global leader behind only the US in scale and maturity
    • Of the 1600 funded SaaS companies in 5 years, 12 exceed $100mn in ARR (vs. 5 in 2020)
    • Companies are leading global markets by product, pricing and mature GTM playbooks
    • Cloud-based data platforms, workflow management tools are key to business agility
    • Low Code No Code, Hyper-automation and RPA, are gaining traction business processes

Deep Tech

  • Market: At 42%, 10-Year CAGR, deep-tech startups will continue to grow at 40-45% CAGR
  • Growth Drivers: Increasing global competition, ease of doing business, expanding Tier 2 & 3 talent skill base, demand for emerging tech
    • Deep-tech start-ups in India are rapidly growing, forming 12% of the start-up ecosystem. 500+ “inventive” deep-tech start-ups are building new-to-world technologies in India
    • Healthcare, BFSI, Defense, Space, and Education are using deep-tech to introduce cutting-edge solutions for own operations and customers
    • AI is being deployed across application areas by Indian companies and government, and is expected to contribute 60% of the net new value add of US$500 billion by FY2026

Fintech

  • Market: Expected to reach ~$150 Bn by 2025, up from $50 Bn in 2021. Expected to be $1 Tn in AUM and $200 Bn in revenue by 2023
  • Growth Drivers: Rapid digitization, fast tracked payment ecosystem, rise in neo banking and Insurtech, focus on Equity investments
    • Financial services forms 20% of the global economy and 24% of India’s market cap 
    • Aadhar-led KYC, eSign, DigiLocker, Account Aggregator, OCEN have led to the creation of uniform, standardized digital rails
    • Every lending decision, customer interaction, and insurance underwriting and claim is expected to be connected to cloud and data, which will be mediated by software

About Fund Manager

Mr. Sunder Nookala (Head Tech & Digital – Wealth)

With over 23 years of experience in the tech industry, Sunder heads the Technology & Digital Business of Equirus Wealth. He successfully built, scaled, and exited Kwench, a leader in the employee recognition industry in 2019. He has also served as an angel investor in several early-stage startups, providing mentorship and guidance to help them grow and succeed. Sunder holds an MBA from IIM Ahmedabad and is a Chartered Accountant. He is passionate about building software products and platforms.

Investment Philosophy

SOURCE BETTER

Leveraging Equirus deep network built over 15 years and proactively seeking companies that align with our interests –

Inbound
  • Equirus Network of VCs
  • Angel Networks
  • Accelerators & Incubators
  • Syndicates & Micro VCs
  • Dorms of IITs, BITs, etc
  • Second-time Founders
Outbound
  • Proactive Outreach in areas of interest
  • Industry Events
  • Conferences
  • Online Platforms

INVEST BETTER

Drawing on our extensive knowledge acquired from 225+ transactions of $9.7 bn, employing a quantitate deal evaluation framework:

  • Pick the Right Founders
  • Real time industry insights
  • Five T Framework

ADD VALUE

Offering strategic counsel, amplifying governance, fostering exceptional teams and building enduring, sustainable enterprises:

  • Governance
  • Board Support
  • Coaching
  • Work Stack
  • PR
  • Recruitment

The Five T Framework

TEAM

  • Experience & Expertise
  • Track Record
  • Complimentary Skill Sets
  • Vision & Strategy
  • Resilience & Resourcefulness
  • Well Intentioned stake

TECH

  • Market Fit & Differentiation
  • Vitamin Vs. Painkiller
  • Product Roadmap
  • Competitive Landscape
  • Scalability & Sustainability

TAM

  • Total Addressable Market & Growth
  • Global Demand
  • Market Trends Influencing Adoption
  • Barriers to Entry
  • Regulations

TRACTION

  • Monthly & Annual Recurring Revenue
  • Daily & Monthly Active Users
  • Customer Acquisition Process and Costs
  • Road to Healthy Unit Economics
  • Channels of Sales

TRENCHES

  • Network and Data Effects
  • Proprietary Technology
  • Switching Difficulty
  • Data & User Lock-in
  • Brand Value
  • Economies of Scale

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Disclaimer: Investing Involves Risk. This document is for information purposes only and should not be viewed as a legal offering document or solicitation. Offers to invest in this fund are made only by the Discretionary Portfolio Management Services Agreement. Past performance does not guarantee future results and there is no assurance that the managed accounts will necessarily achieve their objectives. We do not guarantee any returns in the hand of investors not we take any sort of accountability for the performance of the scheme. The above-mentioned data is collected from the respected Fund house please verify the same at SEBI website.