100X.VC's Playbook Helping Giants Bet On Startups Via Corporate Venture Capital Route

Nitesh Kumar May 23, 2024

CVC has the potential to become a significant alternative funding source for startups in the years to come. CVC offers not only patient capital but also a strong distribution network, market reach and access to a large potential customer base

Venture capital (VC) is still a relatively new concept in India. Interestingly, it's rapidly gaining traction as an attractive asset class due to the potential for lucrative returns on investment (ROI) on exits from startups. Identifying promising startups with solutions to complex problems has always been a challenge, but VC firms like 100X.VC are making it easier for established companies to join the VC scene and invest in the future.

100X.VC has Corporate Venture Capital (CVC) model, partnering with giants like Panasonic and Pidilite. Similar to a traditional VC fund, CVC allows large companies to support and fund early to mid-stage startups but ask for less stakes and more control to founders in the company. In 2023, Panasonic Life Solutions India (PLSIND) launched "Panasonic Ignition," an innovation accelerator programme in partnership with 100X.VC. This program focuses on supporting and funding early to mid-stage startups in the commercial and residential energy management sector. Selected founders receive investment, masterclasses, mentorship and product strategy support.

Additionally, the behemoth established the Panasonic KURASHI Visionary Fund (PKVF) with a total commitment of Yen 8 billion (approximately Rs 450 crore) to invest in startups across Japan, Europe and India.

Globally, major companies such as Qualcomm Ventures, Microsoft Ventures, Intel Capital, Alphabet Inc., Coinbase, Masco Ventures and Cisco have been actively investing in startups at various stages for many years.

In India, CVC has the potential to become a significant alternative funding source for startups in the years to come. CVC offers not only patient capital but also a strong distribution network, market reach and access to a large potential customer base. This creates exciting business collaboration opportunities for young, fast-growing startups looking to disrupt traditional industries with innovative technologies and unique business models.

Joint initiative

"We partnered with Panasonic to select startups that offer unique solutions to complex problems across the world," says 100X.VC Founder and CFO Yagnesh Sanghrajka while speaking to BW Businessworld.

100X.VC typically invests using iSAFE (India's Simple Agreement for Future Equity) instruments. iSAFE notes are convertible security notes, not debt instruments, offering benefits for both startups and investors. Upon the occurrence of specific events, they convert into Compulsorily Convertible Preference Shares (CCPS).

The VC firm also focuses on early-stage startups (pre-revenue to seed) through a unique model called "Class." This model involves funding and nurturing startups, providing mentoring and facilitating opportunities to raise the next round of funding for growth. Its latest Cohort Class 11 focuses on Direct-to-Consumer (D2C), SaaS, Pet, Sustainability, Biotech and consumption-related companies. "We have shortlisted around 15 to 16 companies for the upcoming cohort," adds Sanghrajka.

100X.VC also has a partnership with Pidilite for another CVC initiative. To date, the VC firm has helped Pidilite invest in about five companies, totaling around USD 10 million over the past three to four years through 100X.VC. Pidilite Ventures has identified five specific themes for investment: home improvement, smart building materials, arts and crafts, contractors and customers.

For the first Panasonic CVC cohort, the focus area was energy management for commercial spaces. "We shortlisted around 12 companies and awarded two startups," highlighted Sanghrajka. "The focus was on building solutions, with some startups in the pre-revenue stage."

What lies ahead?

Elaborating on the Pidilite CVC, Sanghrajka mentioned its key focus sector. He said that it would extend beyond pre-revenue stage startups. Panasonic has allocated around Rs 450 crore for India and Asia, with roughly 20-25 per cent already deployed. India is expected to be a among the preferred destinations for the remaining corpus, with around Rs 100 crore projected to arrive in the next three to four years. Notably, Panasonic has invested about USD 50 million to establish the India Innovation Centre in Bangalore.

100X.VC has an active fund worth Rs 125 crore, aiming to invest Rs 1.25 crore in about 100 startups. With Rs 75 to 80 crore already deployed. The early-stage fund has only 25 companies remaining for investment. It is likely to be completed by the end of 2024. The firm is expected to announce its next fund soon. Its first fund of Rs 20 crore invested in about 80 companies over two years and has seen successful exits. 100X.VC achieved a full exit from one Class I company with a 5x return and a 73x return from a partial exit where it divested only 10 per cent of the stake.