Multiple startups IPO-ready, Tenacity Ventures now plans a bigger second fund

“While companies like Purplle, Headout, Tonbo Imaging and Exotel are already IPO ready, others, including IDfy, Toddle, Seclore, Clear, Videonetics, and Qnu Labs, will certainly have the scale to explore options for a listing over a three-year timeframe,” Tenacity’s managing directors Rohit Razdan and Gourav Bhattacharya told Mint in a joint interview. They did not disclose if they plan to sell stakes in the IPOs.

“There is enough flexibility in India, and I think the overall ecosystem has seen a good progression in the last couple of years with many startups tapping the public markets,” Razdan said. “We expect this to ramp up in the coming years as the broader sentiment from regulators and investors alike is to encourage more companies with sustainable metrics to go public.”

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While they will also explore strategic options for exits, Razdan added that the early growth stage fund is likely to see IPOs as a larger percentage of exits, given that Tenacity typically invests in mature companies with a strong product market fit. 

“In some cases, public markets may not necessarily know how to value certain assets, so strategic options make more sense,” he said, adding that the aim is to have many exit options always available for its companies.

The VC firm has already clocked its first exit in Effectiv, a real-time risk decisioning firm, with almost a 2.5x gain when the company was sold to US-based Socure, an artificial intelligence-based provider of fraud prevention and digital identity verification, for $136 million last year.

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New fund

Tenacity’s new fund comes after the VC firm announced the final close of its first fund at $100 million in March last year to invest in Indian companies. About 80-85% of the first fund has already been deployed across 15 companies and the investment firm will begin the process for the second fund in the coming months.

Largely backed by domestic investors, including other startup founders and senior executives, Tenacity plans to increase its average ticket size by 45-50% to ₹60-70 crore in its next fund for which it will also tap institutionalized pools of capital alongside existing investors. Its current average ticket size is around ₹40-50 crore.

With a focus to invest in software and deep-tech companies across series B and C stages, the VC firm looks for companies that are built in a capital efficient manner with low volatility and high ability to generate returns.

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Meanwhile, fundrasing momentum has picked over the last six to eight months with several private equity and venture capital firms including Kedaara, ChrysCapital, Stellaris Ventures, India Quotient, Sixth Sense, Prime Ventures, Accel, A91 Partners, Cornerstone VC and Bessemer Venture Partners that have launched new funds.

Tenacity joins the growing list of other investment firms such as Nexus Venture Partners, Lok Capital, Chiratae Ventures, Peak XV Partners, WEH Ventures, InCred Alternative Investments, Avataar Venture Partners, Blume Ventures and Fireside Ventures that are also preparing to raise fresh capital.