Blume Ventures sees five-fold gain from first fund (2024)

Homegrown early-stage venture capital firm Blume Ventures said it has achieved returns of more than five times of the invested capital from its first fund, including an extension fund. Through the Fund-I and Fund-IA (the extension fund), the firm invested a total of Rs 114 crore between 2010 and 2015.

As much as 98% of the returns were generated from 17 companies or a fifth of the portfolio of the first fund.

The India-focussed firm was founded in 2010 by Karthik Reddy and Sanjay Nath with the aim to address a gap in seed-stage funding for startups during the time.

Through its first fund – a rupee-denominated fund – Blume Ventures began investing in 2011, and has backed startups such as GreyOrange, Carbon Clean, Cashify, Purplle, Zopper, Taxi For Sure and WebEngage.

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The VC firm has raised four funds so far, with the latest being a $290 million fund launched in 2022.

Speaking to ET, Reddy, cofounder and partner at Blume Ventures, said despite the growing size of the funds at the firm, the bar for delivering returns has not reduced.

“In a nutshell, raising $250 million means we are signing up (to return) a billion dollars; there’s no running away from it, which means each large outcome should be over $100 million just for Blume, which means the LPs and Blume believe that we can generate profitable and exitable unicorns,” he said.

Of the total Rs 114 crore invested through Fund-I and Fund-IA, Blume Ventures has so far realised Rs 549 crore through exits, with another Rs 102 crore expected to be realised early next year. In 2024, Blume Ventures is set to exit its position from startups including ecommerce enablement platform Instamojo, online printing service provider Printo and HR automation firm GreytHR.

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Despite a return multiple of 5.7x from the first fund, the firm saw almost half of the fund’s portfolio, or 34 startups, return zero capital, and nine companies returning between 0.1-1x.

Blume Ventures' first fund had 80 Limited Partners (LPs). Bennett, Coleman & Co. Ltd, which publishes the Economic Times, was also an investor in Blume's Fund-I.

According to a Bengaluru-based venture capital investor, an early-stage, sector-agnostic fund is typically expected to clock a 3-5x return on investment.

“There are various factors that are taken into account including the stage at which investments are made…expectations from the LPs or the sector that is hot at the time,” the investor said.

VC firms also generally take a view that rupee-denominated funds have an advantage over US dollar-denominated funds given that the latter must also account for currency exchange losses.

Through its Fund-I, Blume Ventures also passed on making investments in certain startups that saw major jumps in valuations. These include software-as-a-service (SaaS) companies Whatfix and Freshworks, food delivery platform Swiggy, omnichannel beauty retailer Sugar Cosmetics, hospitality firm Oyo, and ride-hailing platform Ola.

For Oyo, Swiggy and Sugar, Blume Ventures passed on the investments saying it had competing companies in its portfolio but “eventually discovered that these were false alarms and should be disregarded sometimes”.

“Every cycle brings a new discovery…in the larger context of other funds, we’re still small. Between when we started and now is that the market opportunity and the confidence in delivering not just valuations but outcomes too has grown ten-fold,” Reddy said.

“What’s surprising is that the two biggest winners (from Fund-I) (GreyOrange and Carbon Clean) are deeptech companies…those two have delivered almost 40% of the gains. Both companies struggled to sell in India, the idea that they could become big and never raised a single dollar from an Indian fund after Blume,” he added.