Prudent Investment Managers, established in 2021, noticed a gap in startup funding and decided to approach early-stage investments with a private equity-like strategy. According to Prashasta Seth, CEO of Prudent Investment Managers, "While traditional early-stage investors focus mainly on the concept and the founding team, assuming that financials will fall into place eventually, we prioritize unit economics, business sustainability, and ensure that promoters secure timely funding to avoid any financial constraints that could lead to a shutdown." The fund house’s portfolio includes companies like Flipspaces, Snapmint, HROne, and The Money Club.
Here are some edited excerpts:
What is your investment thesis?
"Our investments always have a strong tech component; we steer clear of companies that are mere replicas of existing businesses. Although we are generally sector-agnostic, we zero in on opportunities where we see strong potential, supported by a competent team and a sustainable business model."
"We invest across various stages, from early-stage startups to pre-IPO and listed companies. We currently manage a ₹750-crore portfolio management service (PMS) focused on the listed market. This quarter, we aim to launch both a category II and a category III alternative investment fund (AIF). On the unlisted side, our investments span different stages, albeit in a relatively unstructured manner, through a group of investors using power of attorney (POA) structures."
"We do not currently operate on a fund structure and invest as a pool of investors in individual opportunities. Over the past couple of years, we have invested about ₹150 crore across five opportunities."
At what stage do you typically invest in a startup?
"We generally invest at the pre-Series A or Series A stage, concentrating on companies that have shown a viable business model. While they may still be incurring losses at the time of investment, we ensure that there is a clear path to profitability. We evaluate key financial metrics such as unit economics, customer acquisition cost (CAC), lifetime value (LTV) to CAC ratio, gross margins, and EBITDA projections."
"Our sweet spot lies in companies with a valuation of ₹100-200 crore, where we typically acquire a 10-20% stake."
What is your average cheque size? Do you prefer taking a board seat?
"We invest ₹15-20 crore and prefer to lead the funding round. We also take a board seat. Our objective is to collaborate with startups and support them through the next two to three funding rounds."
What is your risk appetite like?
"We adopt a long-term investing approach, typically with a five– to seven-year horizon. Our risk appetite is high — we prefer to have investments in 10–12 companies at a time. However, we do not follow a "pray-and-spray" model."
"We support a company with full conviction and participate in multiple funding rounds for our portfolio companies."
How many investments have you planned for this year?
"We recently concluded an investment. We have plans for 3-4 investments this year."
Published on March 16, 2025.
