Whalesbook
Venture capital firm YourNest has closed a Rs 400 crore continuation fund anchored by HDFC AMC. The fund aims to hold seven high-performing deeptech startups—including Miko, Dozee, and Exponent Energy—for another five to seven years. This strategy provides liquidity to early investors while giving the startups more time to reach potential public listings or acquisitions.
What Happened
YourNest Venture Capital has officially closed a new Rs 400 crore fund titled 'YourNest Continuum Fund I.' The primary anchor investor for this vehicle is the HDFC AMC Select Fund of Funds I. The purpose of this fund is to inject an additional Rs 60 crore to Rs 90 crore into a specific group of seven mature startups from YourNest’s existing portfolio. The companies identified for this support include Miko, Dozee, Exponent Energy, Twid, Opkey, and Thriwe.
Why This Matters For Investors
Traditional venture capital funds operate on a fixed timeline, often spanning seven to ten years. When a fund reaches the end of its life, the manager usually has to sell its stake in the portfolio companies, regardless of whether those companies are ready for an IPO or acquisition. A 'continuation fund' changes this dynamic. It allows the venture capital firm to buy time—in this case, five to seven more years—to nurture these companies. For investors, this structure is significant because it provides a way for early investors to 'exit' and get their cash back, while the startups get continued financial backing to scale further toward mature business milestones.
The Deeptech Focus
The startups supported by this new fund, such as Dozee and Exponent Energy, operate in the deeptech and high-technology manufacturing sectors. These industries typically require longer timeframes to reach profitability compared to consumer apps or software-as-a-service businesses. Because these companies are building hardware, infrastructure, or complex technological platforms, they often need significant capital and patience before they can list on stock exchanges or become acquisition targets.
The Business Context
This move comes at a time when there is increased focus on the Indian deeptech ecosystem. Government initiatives, such as the Research Development and Innovation scheme and the Startup India Fund of Funds 2.0, are designed to boost local R&D and manufacturing. YourNest’s decision to launch this continuation fund highlights that maturing startups need sustained support beyond their initial growth phase. This strategy helps the VC firm preserve ownership in assets that are showing promise without the pressure of a forced sale.
What Could Go Wrong
Investors in the startup ecosystem should be aware of the inherent risks in deeptech. These businesses often face challenges related to product-market fit, long development cycles, and intense competition. Even with additional capital, there is no guarantee that these companies will achieve a successful IPO or exit in the next five to seven years. The 'continuation' strategy essentially doubles down on the belief that these companies have long-term value, but it does not remove the risk of failure or market rejection for these underlying technologies.
What Investors Should Track
For those watching the startup and private equity space, the key monitorables are the execution of these specific companies. The success of this fund will depend on whether the startups can hit their revenue and technology milestones over the extended timeline. Investors should also watch how similar continuation funds gain popularity in the Indian market as a tool for liquidity. Future regulatory or policy changes affecting R&D, manufacturing, and tech-led exports will also directly influence the viability of these deeptech ventures.