Spyre VC actively looking to invest in early/ growth-stage proptech startups

Spyre VC, India's first proptech fund, is focused on nurturing startups in the Indian landscape, beyond investors. It aims to become a strategic partner to foster innovation across the real estate space and its ancillaries. The fund is backed by Venture Catalysts, India's first multi-stage VC fund-house and Neovon, a consortium of leading developers in India, and entered a partnership with real estate body Credai.

Led by Murali Krishna V, Anil Jain and Abhimanyu Bisht, who collectively bring over 40 years of expertise in real estate, investments and technology, Spyre Proptech offers a stage agnostic portfolio with co-investment opportunities. In an interaction with Bizz Buzz, Spyre VC’s Principal Murali Krishna shares how he is nurturing change across realty business operations via integration of new-age technologies

How did you raise Rs 400 crore, the recently launched fund to support proptech startups? Why did it take more than two years to launch the maiden fund?

Spyre VC, in partnership with Confederation of Real Estate Developers' Associations of India (Credai), embarked on a journey over a year ago to raise Rs 400 crore, aimed at supporting innovative proptech startups. However, the process of launching the maiden fund extended over a year. This timeline was necessary to navigate various complexities and ensure a robust foundation for the fund's operations.

Firstly, obtaining regulatory approval, such as the CAT 2 approval from the Securities and Exchange Board of India (Sebi), was a pivotal step. This involves complying with stringent regulatory requirements to ensure transparency and investor protection. Secondly, securing anchor investors was essential to establish credibility and attract further investments.

Building trust and confidence among potential investors requires both time and effort. Moreover, assembling an experienced team capable of effectively managing the fund was imperative. This involves recruiting professionals with a deep understanding of both the proptech industry and investment management.

The fund's structure reflects a cautious approach, divided into two phases of Rs 400 crore each. This phased approach allows for flexibility and mitigates risks while assessing the depth of the proptech industry and gauging market opportunities. Currently, progress is underway with 20 per cent of the capital already committed by a consortium of developers known as Neovon.

Active discussions are going on with other limited partners (LPs), including developers and institutions, with soft commitments already secured for 30-40 per cent of the capital. In short, it took time to set everything up properly, but now they're ready to dive into the world of proptech and help startups to grow further.

Have you identified the proptech startups to invest into? How many were finalised so far and how many are in the pipeline? What is the average ticket size? What do your team members observe while zeroing in on a particular startup?

Yes, we've actively engaged in identifying promising proptech startups for potential investment. Our approach has been comprehensive, conducting roadshows across five cities initially, with plans to extend our outreach to more locations. These roadshows have been instrumental in not only discovering startups but also in comprehensively understanding the diverse themes within the proptech industry.

Currently, we have amassed a pipeline of approximately 125 proptech startups at various stages of development. Among these, we are actively in discussions with around 25 startups, carefully evaluating them for investment consideration. From this cohort, we anticipate shortlisting around 4-5 startups that align closely with our investment criteria.

Our investment strategy is tailored to focus on early-stage opportunities, with an emphasis on follow-on investments and Series A to Series B rounds, accounting for 30-50 per cent of our portfolio allocation. For early-stage investments, we are considering ticket sizes ranging around Rs 2-8 crore, while for growth-stage opportunities, we are prepared to invest roughly Rs 8-40 crore.

Additionally, we have earmarked significant capital for subsequent rounds to support the growth trajectory of our portfolio companies. When evaluating potential investments, our team places paramount importance on identifying startups that address critical challenges within the real estate industry, such as enhancing efficiency, promoting sustainability, and tackling pertinent issues.

We are particularly interested in startups that leverage technology to innovate and create solutions in areas where there is a clear white space, demonstrating a robust understanding of the market needs. We prioritise startups led by founders with a strong pedigree and a track record of success. We look for indications of traction, such as proof of concept and early revenue generation. These factors underscore the viability and scalability of the business model of a proptech startup.

Among proptech startups, what are the technologies you are looking for? According to you, what kinds of startups have more potential to transform the real estate market?

Among proptech startups, we are actively seeking technologies that address key challenges and opportunities within the real estate market. Currently, our focus lies on startups that are dedicated to providing solutions geared towards enhancing efficiency for developers, thereby enabling them to optimise margins and streamline operations.

In addition to efficiency-driven solutions, we are particularly interested in startups that prioritize sustainability and climate tech within the real estate space. This includes innovative cleantech-oriented technologies that contribute to reducing environmental impact and promoting sustainable practices throughout the lifecycle of a property.

Furthermore, we see significant potential in startups that offer new-age construction technologies aimed at revolutionising traditional construction methods. These technologies encompass a wide range of innovations, such as modular construction, 3D printing, advanced materials, and automation, all of which have the potential to improve construction efficiency, reduce costs, and enhance sustainability.

When are you planning to raise another Rs 400 crore out of the initial plan to set up a Rs 800-crore ($100-million) fund?

We are currently in the process of completing the first close and the initial phase of fundraising for our fund. As we proceed with these initial stages, we are also closely monitoring the market depth for proptech, sustainability, and cleantech solutions.

Once we have assessed the market landscape and identified sufficient opportunities aligned with our investment thesis, we will strategically plan the timeline for raising another Rs 400 crore, thereby fulfilling our goal of setting up an Rs 800-crore ($100-million) fund.

Our aim is to ensure that we secure the necessary capital to capitalise on promising investment opportunities while remaining responsive to market dynamics and investor sentiment.

How is the support from the Credai and Neovon? Is Spyre's funding support confined to the Credai members and their allies?

The support from Credai and Neovon has been instrumental in bolstering our fund's operations and investment strategy. Our exclusive association with Credai provides several benefits, including access to LP support and a robust go-to-market strategy for the proposed investee companies. Additionally, the Credai network enables us to validate ideas and leverage industry insights for informed investment decisions.

Neovon, the consortium of leading developers, has already demonstrated significant commitment to our fund by pledging 20 per cent capital. This partnership underscores the confidence that industry leaders have in our investment approach and the potential impact of our portfolio companies.

While our association with Credai and Neovon strengthens our position within the industry, Spyre's funding support is not confined solely to Credai members and their allies. We remain open to partnering with innovative startups and strategic investors across the real estate and technology sectors, ensuring a diverse and dynamic investment portfolio.

When did the company get the license from Sebi? How smooth was the process?

The company obtained its CAT 2 license from Sebi in mid-2023, marking a significant milestone in our journey. The process of acquiring the license was notably smooth, facilitated by meticulous planning and coordination among all stakeholders involved. Additionally, we ensured that all necessary fund partners, including legal advisors, tax advisors, custodians, and other essential entities, were onboarded seamlessly.