Transition VC has introduced its second fund to invest ₹1,500 crore in 20 engineering-led startups over four years. The firm plans to support companies across energy, advanced manufacturing, and industrial technology. This follows the success of its first fund, which achieved significant returns and maintained a zero write-off rate.
Detailed Coverage
Transition VC, a venture capital firm focused on the energy sector, has announced the launch of its second fund with a target size of ₹1,500 crore. The firm intends to deploy this capital into approximately 20 startups over the next four years, with individual investments expected to fall between $2 million and $5 million. The deployment phase is scheduled to begin in the third quarter of fiscal year 2027.
Expanding Investment Scope
While the firm continues to prioritize the energy transition value chain, Fund II represents a strategic expansion into broader industrial areas. The fund will now actively pursue investments in advanced manufacturing, application engineering, and specialized energy infrastructure, including nuclear and geothermal technologies. By broadening its focus, Transition VC aims to capitalize on the increasing overlap between energy systems and industrial hardware. The firm stated that it intends to build a portfolio of complementary companies, fostering collaboration and technical synergy between its holdings to strengthen their market position.
Track Record and Strategy
The launch follows the performance of the firm’s first fund, which concluded with a corpus of ₹723 crore, exceeding its initial target of ₹400 crore. According to the firm, Fund I achieved a 57 percent internal rate of return and generated a multiple on invested capital exceeding 3x. Notably, the firm reported no write-offs in its first portfolio, with several startups reaching profitability or securing follow-on funding rounds with annual revenues surpassing ₹100 crore.
Transition VC continues its focus on the so-called missing middle segment—startups that have proven their technology but are still in the process of scaling. The management noted that it sees an underserved opportunity in supporting these engineering-heavy firms before they reach later stages of development where valuations typically rise. Additionally, the firm is shifting its geographic strategy, increasingly backing startups that use India as a base to manufacture products for the global market, rather than focusing exclusively on domestic demand.
Investing in Deep-Tech Complexity
Investing in engineering-led and deep-tech startups presents distinct challenges compared to consumer-focused venture capital. The firm highlighted that the success of such investments depends heavily on assessing the commercial readiness of complex technologies and the ability of founders to sustain operations through long development cycles. The new fund has attracted commitments from a mix of existing partners, global institutions, corporate investors, and family offices. Investors monitoring this space may track the firm's progress in securing these capital commitments and the specific startups selected for investment, as the ability to execute on these long-term industrial projects remains a critical indicator of future fund performance.