A greenshoe option is a provision that allows a fund to raise more capital than originally targeted if investor interest exceeds initial expectation.
Promaft – named as a short form for ‘product market fit’ – has been launched by Alibaba Group’s former investment head Raghav Bahl and former 9Unicorns partner Soham Avlani.
“Product market fit (PMF) is often equated with growth in Indian startups, but it is much more dependent on things like resonance with the customer… Given our collective experience, we intend to identify firms with PMF well ahead of time and help them identify which metrics to concentrate on to achieve high-quality PMF,” Bahl told ET.
In their previous roles, Bahl and Avlani have led investments into firms including Swiggy, Paytm, BigBasket, XpressBees, TaxiForSure, VideoVerse and PharmEasy.
Promaft will invest in 10 to 12 firms under the first fund and will come onto the captable after a firm has found product market fit, around series A or series B, Bahl said.
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“I think this vintage (of startups) is just phenomenal… Say, in 2021, valuations were unreasonable and entrepreneurs needed to raise much more frequently, which meant they had to use short-term tactics to drive growth… Now, entrepreneurs are a lot more capital efficient and the valuations are also normal. So, it is a double trophy vintage to us,” he said.The fund will see its first close towards the end of this calendar year, which is when it is looking to make its first investment.
Avlani said it will be a sector-agnostic fund, but will have some focus on the consumer healthcare and software-as-a-service (SaaS) sectors.
The fund has raised capital from a number of Indian family offices, as well as from the founders of firms such as Paytm, Zomato, Browserstack, Livspace, PharmEasy, and VideoVerse.
“We went after LPs (limited partners) that were aligned with our vision of making two high quality decisions a year,” Bahl said. “We’re not operating through spray-and-pray or momentum, and we’re definitely not operating through FOMO (fear of missing out),” he added.