Portfolio valued at 5X of invested capital; ranks among top VC funds globally, says Artha Venture Fund

Time of India

a day ago

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Artha Ventures says it was founded with a clear belief in the power of lean capital and operational discipline. It was an early champion of India's microVC model - writing smaller cheques into scalable, high-potential sectors such as D2C, SaaS, EV infrastructure, and agritech. In a conversation with ET Digital, Anirudh A. Damani, Managing Partner, Artha Venture Fund talks about the investment thesis of the fund, what makes them different, how the Indian startup ecosystem is maturing and some common misconceptions that investors have about India . Edited excerpts.While our investment strategy may resemble that of a typical early-stage VC, backing high-potential seed-stage companies, our approach is fundamentally different. Artha Venture Fund has intentionally built a concentrated, high-conviction portfolio. This unique approach, rather than adopting a 'spray and pray' model, involves selective capital deployment and reserving over 70% of our funds for follow-on rounds. This means our alignment with founders extends well beyond the initial investment. We support them through multiple stages as long as they deliver on key milestones. This level of commitment also gives founders visibility into their future funding potential, which enhances decision-making and long-term planning.Furthermore, we have built a lean yet high-leverage team structure: for every 4–5 portfolio companies, we assign a full-time analyst (either a CA or an MBA in Finance), an associate, a principal, and a partner. This layered support system ensures that founders receive attention and operational help that would be hard to find in most funds at our stage. That structure, supported by a robust backend in legal, compliance, IR, and administration (which together comprise nearly 33% of our team), enables us to go deep rather than wide, something that has paid off in terms of portfolio quality, ownership, and outcomes.One of the core global best practices we adopted early was a post-investment operating model. Globally, hands-on fund support often kicks in only after Series A or B—but in India, founders need it from day one. We localized that approach to suit the high-friction realities of building in India. Our team doesn't just help companies scale; we help thembetter, navigating GST, ROC filings, tax authority queries, founder compliance, and even structuring cap tables or navigating co-founder splits.We have engineered our fund architecture to reflect the high-touch Indian environment. While Western founders may enjoy plug-and-play ecosystems, India is a country of edge cases from the variability of state laws to linguistic and cultural nuances even within metro cities. By building a team that includes full-time legal and compliance professionals and maintaining disciplined, recurring touchpoints with founders, we've created a playbook that feels global in design but is deeply rooted in India's execution.In India, I believe smaller, nimble funds are structurally better positioned to outperform. This market is not the U.S. or Europe—it's more fragmented, less homogeneous, and far more cost-efficient when it comes to building. Larger funds that rely on massive outlays to chase scale often struggle to generate the returns Indian investors demand. In contrast, a smaller fund with strong ownership, capital efficiency, and a clear return discipline can not only outperform the public markets but also build meaningful DPI.Between FY19 and FY25, the NIFTY has nearly doubled, even accounting for the COVID years. In the same period, our fund has returned close to 5x on invested capital, and our IRR is nearly 3x that of the NIFTY. This success is not a happy accident. It's the outcome of strategic patience and deal-by-deal discipline. In India, scale does not always come from ticket size; it comes from precision, timing, and knowing whento invest. Our decision to pause deployments during the overheated 2021–2022 period and resume investing heavily in 2023–2024 is a prime example. Large funds, with pressure to deploy, often do not have that luxury.Our attractiveness to global LPs comes down to a few sharp metrics: a high IRR of 61%, a TVPI of 3.75x in INR terms (3.40x in USD), and a DPI nearing 20% with several more exits in active diligence. But beyond performance, what appeals to family offices and global LPs is our discipline. We do not chase hype cycles. We did not draw down capital during the 2021–22 valuation bubble, which protected our portfolio vintage. A large portion of our seed capital was deployed in the last 12–18 months. We view that window as one of the best investing vintages in recent times.We also maintain a high average ownership (over 15%) in our top 10 companies, and our top portfolio companies are profitable, with strong institutional follow-on participation. This reflects a model where capital efficiency and governance matter as much as growth, which deeply resonates with LPs seeking long-term, sustainable value creation.India's ecosystem is maturing rapidly—but it's doing so in its own way, not by mirroring the West. There's a growing realization among founders that fundraising isn't the business model—profitability is. The 'growth at all costs' era is fading. Startups are now considering their unit economics, sustainability, and scaling revenue, not just burn rate.The transition from VC to PE also shows where maturity is kicking in. Only about 2% of companies that raise a seed round go on to raise a Series C. That inflection point separates venture-backed promise from private equity-backed performance. Founders who cross that threshold are building real businesses, not just pitch decks.Moreover, the mindset is shifting from 'blitzscaling' to 'grease-scaling'—building on your own positive cashflow rather than investor capital. We strongly believe in that model, and so do the best founders today.One of the biggest misconceptions global investors holds is that India is a 1.5 billion-person monolith. It's not. India is a collection of highly fragmented, diverse micro-markets. Language, lifestyle, income bands, and purchasing behavior. Each region is a different country in itself. Applying a western scale lens to this market has lost many funds a lot of money.At Artha, we have built our thesis around finding and dominating micro-markets. As my father often says, '1% of India is still 15 million people,' and that's often where the real opportunities lie. If you can serve the top 6% of Indian consumers effectively, you're already targeting a market that makes up 70–80% of consumer spending. That is where our founders thrive: solving sharp, localized problems at scale, without pretending the entire country behaves like a homogenous consumer bloc.Our global ranking likely stems from a mix of hard numbers: high IRR, strong TVPI, early DPI, and operational discipline. We built our fund to be capital-efficient, avoided overpaying during peak vintages, and invested deeply in governance and founder support. We were active when the market was quiet and paused when valuations were irrational. That's the kind of asymmetric behavior that leads to outlier outcomes. In fact, we were ranked third globally among all private funds in the 2019 vintage, per PitchBook data.However, we do recognize that global rankings often favor funds with large DPI or USD-denominated returns, which can disadvantage India-focused INR funds. Currency depreciation alone can mute impressive domestic returns when measured in dollar terms. Moreover, softer elements, such as market friction, regulatory complexity, or founder handholding, are often not captured in these models. But they're essential for performance in markets like India.The global downturn has hit private markets harder than public ones. We're emerging from a period of irrational exuberance, where capital was nearly free, and many portfolios are feeling the hangover. The correction, however, is healthy. Valuations are more rational, founders are more focused, and LPs are once again asking the right questions.Public markets globally are on fire, but many of them are already overpriced. In contrast, early-stage private deals in India today are trading at a discount to what one would pay for small- or micro-cap companies in the public markets, or those entering the SME IPO window. That makes private markets here particularly attractive for long-term investors right now.We see this as one of the best vintages to invest in. But we're also cautious that bubbles still exist, especially around AI. Our job is to find enduring companies with strong moats and disciplined execution, rather than chasing the narrative of the month. That mindset, we believe, will differentiate winners from the rest over the next decade.