Foundation PE buys 100% LP interest in Prime Venture Partners’ first fund

This is a rare transaction in the venture capital (VC) and private equity (PE) industry in India where LP interest has changed hands at the fund level itself.

In a statement, Prime Venture Partners said that the transaction has helped deliver a healthy, top-decile return to its LPs in its ninth year of operation and has further extended the fund by four years. Besides, Foundation Private Equity has now become the sole LP in Prime Venture Partners’ first fund, it added.

Separately in an interaction with VCCircle, Sanjay Swamy, Co-Founder and Managing Partner, Prime Venture Partners, said that the transaction has delivered four times returns to its LPs.

Prime Venture Partners had launched its Mauritius-based first fund of $8 million in 2012. The fund’s LPs included venture capital firm Mayfield, Chamath Palihapitiya’s Social Capital, Yahoo co-founder Jerry Yang and other high net worth individuals (HNIs) from the Silicon Valley, said Swamy.

He explained that the transaction showed that even without exiting the portfolio companies, venture capital firms can deliver at the fund level itself a “meaningful exit” to its LPs.

“That is something the market will find very attractive from an LP perspective. There is only change in the duration of the fund and no impact on the portfolio firms,” he added.

Prime Venture Partners’ first fund portfolio consists of seven firms including an interactive learning startup Quizziz, which raised a Series B funding round led by Tiger Global last year, and Happay, which was acquired by Kunal Shah led Cred late last year.

Swamy also said that this transaction could find more takers in the industry. He added that what worked in favour of Prime Venture Partners was its concentrated portfolio.

“Funds which have a small concentrated portfolio and have a meaningful ownership in them will be attractive for such outcomes,” he said. He also said that the deal structure could also vary and LPs may also do a partial exit instead of a full exit.

Jeremy Foo, Co-Founder and Partner, Foundation Private Equity, said in the statement the it has taken a patient approach thus far with evaluating venture opportunities in India, and is now excited to be backing “a very high-quality GP team and portfolio” with its first transaction in India.

Candor Asia Ltd acted as the advisor for this transaction.

There have been rare instances of a secondaries deal in the PE/VC industry in India where LP interests have changed hands. In March 2018, TR Capital acquired a 50% LP interest in the first fund of homegrown private equity firm Tano Capital. The same year, Switzerland-headquartered global asset manager Capital Dynamics offered an exit to the non-institutional LPs of the first fund of Asian Healthcare Fund.

While Prime Venture Partners has facilitated full exits for its LPs from its first fund, the venture capital firm is also nearing the final close of its fourth fund, said Swamy.

Prime Venture Partners had announced the first close of its fourth fund at $75 million in August last year. 

The fourth fund has a target corpus of $100 million. The early-stage investor closed its second fund worth $46 million in 2016 and closed its Fund III in 2018 at $72 million.