Inside PE True North’s investment in late-stage Indian companies

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Zomato’s initial public offering in 2021 was a pivotal time for Indian startups. It was the first company in the field of internet-based technology to launch a stock market offer. Since then several late-stage companies have made an effort to get into the public market.

In proportion, the curiosity in late-stage startups and pre-IPO deals has increased after declining for two years the private equity industry is returning to the market.

Global PE companIn the IPO-Bound Digit Insurance Loss Boost by 141%, Increasing to INR 296 Cr in FY22ies like Blackstone, KKR, Carlyle and TPG have always invested in the mid-to-late-stage and some even promising early-stage startups. But in the Indian diaspora, PE funds have historically avoided investing in Indian diaspora.

With larger startups finally having their public market list plans put in place Indian PE funds have been currently on the lookout for the next big investment by investing in companies which have proven their value on the market.

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To increase its presence in the startup world, True North is putting together a seventh fund of investment with 25% of the funds is earmarked for investing in technology-driven, late-stage and pre-IPO companies.

The company’s first move into the startup world as a way to invest in the form of investment, is PolicyBazaar which was launched in the year 2017 in which it made an investment of around $50 million of total capital. It sold some from its investment in the company in 2021 but not before establishing the company to launch an initial public offering.

In particular, the company is looking to invest in fintech, healthtech consumer tech, and other digital tech ventures, Maninder Singh Juneja, an associate at True North Co, tells Economic Pitch  that the company is investigating the personal care and the meat and seafood industries to see if it is a good investment.

Without naming specific names Maninder stated that the company is engaged in discussions with potential investment firms, and has had talks in the latter stages with a few.

However, True North is not your typical investment company.

In the first place, its criteria for evaluating investments differ than those found in the startup industry in which the founder owns all things, even products.

True North’s investment criteria

Maninder claims that in order in order for True North to get interested in a business that it must be the latter stage of growth, possibly an E- or series F venture.

The most important thing to consider in addition to the stage of funding is the size of the market the startup is targeting the value proposition it is currently offering and the type of value proposition it’s striving to reach.

Other aspects True North considers include execution strategy — how the startup can accomplish what it been set to accomplish as well as the knowledge and expertise that is employed and the procedures developed by the management to meet the demands of the industry and how the startup differs from the competition and where it is positioned on the market and the potential impact of the startup.

In addition to the basic aspects of the company along with its income model True North also looks at profitability measures in detail.

In actuality, over the past few months, as the funding winter swoops upon the industry, small-scale funds than True North–which typically invest in growth or early stage companies–have asked founders to outline their path to profitability or at the very least, show positive unit economics. This was not the norm prior to.

If the recent recession in funding affected the way the PE firm looks at the investment process, Maninder says bottom lines were always something True North had focussed on prior to the winter..

However, absolute profitability isn’t the only criterion.

In the past in the past, the PE firm would look for businesses that could be able to be profitable within 4 to 5 years from the time of their first funding. Now, however, the parameters like digital sourcing, the ease with which an organization can benefit from automation, as well as the channels that customers are using to come up with (i.e. paid traffic or unpaid traffic) are the ones that carry more significance.

True North’s standard investment period is between 5 and 10 years.

Cash is king

With the world’s markets under pressure, private investment have been hit.

In the last few months Startups have been struggling to raise funds and have been laying off workers to lower costs and increase the runway.

The investors have been sounding the alarm for their portfolio companies.

A US-based investment company Y Combinator has advised its portfolio companies — including the likes of, Dropbox as well as Razorpay–to prepare to be prepared for any eventuality’ as Sequoia Capital has said that these are the times of an ‘episode.

“We are not convinced that this will be a second sharp correction, and a rapid V-shaped recovery as we witnessed in the beginning of the pandemic” Sequoia said in a 52-slide presentation.

The message for all of us is “brace yourself”.

To be able to endure this recession startups must be more agile and keep an watch over their reserve funds Maninder recommends.

In reality the event that a business is in financial straits, the company would be willing to raise money even at a lower value.

True North has so already made 61 investments in 56 businesses, including Keya Foods, Fincare, ACT Fibrenet, Biocon Biologics as well as Manipal Hospitals.

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