Cornerstone Venture Partners, a fund house focused on business-to-business enterprise technology, has made 21 investments in the last five years. After deploying its $50-million first fund, the venture capital firm recently announced its $200-million second fund with a 12-year lifecycle.
Abhishek Prasad, Managing Partner, discusses with businessline the trajectories of the two funds, the software-as-a-service (SaaS) ecosystem, generative AI, and plans for the upcoming fiscal. Edited excerpts from the interview:
Are you currently deploying from fund I or II?
Fund I has been fully invested, with some capital for follow-ons in the existing portfolio. The first close for fund II would be around June-end and the final close a year later. This year, we hope to raise 60-70 per cent of the $200-million target.
After the first close for fund II, we will announce the first transactions. By then, we would have built 5-7 new companies in our portfolio.
Which are the most significant B2B opportunities today?
Three inflection points excited us about launching the second fund. The first is tech-driven... how GenAI is coming of age. The second point, from an enterprise tech perspective, is a shift in the business model. SaaS, historically, has been a usage-based model, but that is shifting to value share. The third inflection point is on the tech-infra side. Multiple enterprises will appear in the area of Web 3.0 and quantum computing.
How do you see the shift from horizontal to vertical SaaS playing out for your portfolio companies and, on a larger scale, for enterprises?
In horizontal SaaS, you build a generic feature or functionality that any industry, enterprise, or SME [small and medium-sized enterprises] can use globally. It is tough for Indian SaaS players to build horizontal companies with significant value because US-based SaaS start-ups are focusing on new markets like India. This is where vertical makes a difference. When you focus on a specific industry and domain, your value proposition is much deeper. Almost 90 per cent of the companies in our existing portfolio are vertical.
Which are your focus areas? Has your investment criteria changed from fund I to II?
Seventy to eighty per cent of investments from our second fund will be in new-age SaaS models, which are software platforms and marketplaces moving in the direction of value share. For the remaining 20-25 per cent, we will dabble in Web 3.0 ecosystem, quantum, and carbon neutrality. Cheque sizes will be in the $5-15 million range and deployed across multiple rounds, including follow-ons. The criteria remains somewhat similar.
We prefer companies with commercial validation, expansion, revenue visibility, or cash-flow visibility.
How will GenAI impact SaaS enablement? How quickly are enterprises likely to adopt it?
It is a major inflection point. One of our portfolio companies works with large banks and insurers and runs business simulations to scale up leadership teams. The company used GenAI to simulate industries, skill sets, and business scenarios in real-time. This eliminates the time-to-market, especially when entering a new segment. Transforming a passive training or an upskilling solution into a ‘performance co-pilot’ is the difference GenAI can create.