Specialist funds aid startup exits

As long-term private equity funding remains tight and public listings unpredictable, early backers of Indian startups are increasingly turning to a once-rare alternative: selling their stakes to specialized investors to exit.

- Mansi Verma

The surge in such deals, called secondary portfolio sales, is driven by early-stage domestic funds nearing the end of their life cycles. As they need to return money to limited partners or investors and raise new funds, it's pushing them to explore alternative exit routes.

This has drawn global secondaries specialists such as TR Capital, TPG NewQuest, Pantheon Ventures, Glendower (CVC), LGT Capital, and HarbourVest, which are actively scouting such deals in India, according to people familiar with the matter.

"India's secondaries market has seen strong activity over the past 18 months, driven by supportive economic policies and buoyant capital markets," Paul Robine, founder and chief executive officer of TR Capital, told Mint. Last week, TR Capital acquired Eight Roads Ventures' stake in three portfolio companies in a $50 million transaction. Robine confirmed that the firm is actively looking for more such transactions in India.

Early investors often exit during larger late-stage funding or ahead of initial public offerings (IPOs) when private equity firms enter. These rounds typically involve a mix of new stock and the sale of existing shares. However, such funding remains tight as investors and founders continue to disagree on valuations in the private market. Exits through IPOS also remain uncertain amid global volatility.