Blume Ventures Aims to Bet on Its Current Portfolio With the New Opportunity Fund On Thursday, Blume Ventures announced the first close of its new opportunity fund, Fund 1Y. This is Blume's third growth fund, and it has already raised INR 200 crore of the INR 400 crore target with visibility for the remaining corpus.

The first close of Blume Ventures' new opportunity fund cum continuity fund, Fund 1Y, was announced on Thursday by the Bengaluru-based venture capital firm, which in December 2022 raised over USD 290 million in its fourth and largest fund. With visibility for the remaining corpus, Blume has already raised INR 200 crore (USD 25 million) of the INR 400 crore (USD 50 million) target for its third growth fund.

Existing LPs from Blume Ventures' prior funds are once again participating in Fund 1Y's LP base.

What are the targets of the new fund?

Blume Ventures will utilise a portion of the money from this new Fund 1Y to acquire strong winners from its Fund I and related investment vehicles, including Intrcity, Cashify, Carbon Clean, and Zopper, and use the remaining money to invest in the current winners of their other funds.

Blume Ventures Vice President of Growth Investments Vikram Gawande commented on the news, saying, "We have a fantastic collection of winners in our portfolio, and I am delighted that we have been able to raise additional capital to stay invested longer and delve deeper in our winners. We have faith in the power of public markets and are certain that companies in our portfolio, including Purplle, Zopper, Cashify, are firmly established on the right track."

"The current environment and our unique strategy allows us to balance the interests of our current and incoming investors and hold the best of our companies for another 3–4 years before eventual public listing and create wealth for the local ecosystem," claimed Karthik Reddy, Co-founder and Partner, Blume Ventures. This is a win-win situation for all involved.

Focus areas

Although Blume maintains an eye on the macroeconomic and funding climate, the firm doesn't overly depend on it when it comes to making investments because it believes in thesis-driven investments.

Software-as-a-Service (SaaS):

Blume is witnessing significant momentum in the SaaS sector and anticipates this trend to persist for the foreseeable future. "SaaS businesses offer efficient scalability and present opportunities for Indian tech entrepreneurs to address substantial challenges in the enterprise and SME domains. We are actively seeking investments in this space," according to its Partner Ashish Fafadia.

Climate Tech and Environment:

Blume Ventures has a strong conviction in the climate tech and environment tech sectors. "We are one of the only funds in the market that has consistently emphasized this area and has a notable track record of successful investments to show over the last 12 years. Our focus includes solutions related to climate change, the environment, and energy. We are committed to doubling down on our efforts in this sector," Fafadia said.

Fintech:

Fafadia claimed to have observed a resurgence in the fintech sector and its intersection with various other industries. Many companies in Blume's pipeline and within its portfolio exhibit a strong fintech orientation. "Given this renewed "Fintech Mojo," we are actively evaluating opportunities in this space, leveraging the overlap with financial services," he added.

Artificial Intelligence (AI):

AI remains an area of interest to Blume. "We are closely monitoring developments in this field, seeking investment opportunities that demonstrate promising advancements in AI technology and applications," emphasised Fafadia.

"These four areas represent our current inclination and focus for portfolio investments. However, we continuously evaluate emerging sectors and remain open to exploring new opportunities aligned with our investment thesis," he continued.

Blume's focus is on supporting startups that can demonstrate a frugal approach to growth, particularly at the growth stage or late stage, while driving them toward profitability.

The firm claims that it closely monitors its portfolio companies, providing guidance and intervention as necessary to assist them in their journey towards profitability. "We understand that investments are crucial during the early stages of a company's development, and we make strategic decisions based on their specific requirements," stated Fafadia.

The future outlook

In the mid and growth stages, Fafadia is witnessing "value-based deals" which means investments are available for companies that are priced fairly and have sound business fundamentals. "Such companies in our portfolio have successfully secured Series B and C funding recently. Additionally, we have even seen instances where companies raised significant late-stage rounds at fair valuations. It's worth noting that down rounds are not yet widespread, but we anticipate the funding market to remain tight and some changes in the next one to two quarters."

In contrast, the late-stage investment landscape is currently experiencing a different dynamic, as per Fafadia. "Mega deals are almost non-existent, indicating a tighter environment for startups seeking substantial funding. We anticipate this trend to persist for the next six to eight months, leading to downrounds, unless these companies become profitable and go to public markets," he noted.