Sixth Sense to raise ₹2,500 cr to cash in on fresh wave of consumer disruption

Among India’s earliest rupee capital funds, Sixth Sense Ventures is raising ₹2,500 crore for its fourth fund, excluding a greenshoe option that it can use to raise more money subsequently, founder Nikhil Vora told Mint in an interview.

The investment firm has backed prominent startups such as Bira, a craft beer maker, Wonderchef, a maker of cookware and kitchen appliances, and Uppercase, a maker of bags and luggage. 

Sixth Sense typically dedicates 50-60% of its funds to Series A investments, a startup’s first significant venture financing round.

“While we want to be a dominant player in Series A, we can invest across the lifecycle of a company. We have the ability to do angel and growth stages to even listed companies," Vora said.

From its fourth fund, Sixth Sense plans to invest ₹50 crore to ₹250 crore in companies, depending on the fundraising stage.

Sixth Sense has deployed nearly 90% of the capital from its third fund, which had a corpus of about ₹2,600 crore, including a greenshoe option. Its first fund had a corpus of ₹118 crore, and its second, ₹515 crore.

Vora said Sixth Sense typically dedicates 80-85% of each fund to new investments and the remaining to top up investments in its portfolio companies.

Disrupting duopolies

India is increasingly seeing an immense appetite for consumer-focused funds looking to tap evolving consumption patterns and a growing preference for premium products. Rising disposable income has opened significant opportunities for new brands to scale up.

Consumer-focused investor Sauce VC raised its third fund last month with a corpus of ₹250 crore. Last year, DSG Consumer Partners raised $114 million (about ₹950 crore) to back consumer-centric startups in India and Southeast Asia. Fireside Ventures raised its largest-ever fund at $225 million (nearly ₹1,900 crore) in 2022 to back Indian startups.

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While other venture capital firms have also invested in consumer startups, Vora said it is still an underpenetrated market with a lot of scope for disruption. “Times are changing now.. most funds in India that have evolved on the back of infrastructure, technology, and banking and financial services are placing greater importance on consumer-facing businesses."

India is largely a duopoly market, Vora explained. Over the past 50-60 years, two companies have typically commanded over 80% of the market in almost every category, he said.

But with the evolution of third-party logistics, e-commerce and faster distribution channels, new brands are challenging legacy players, he said.

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“I am a big believer in quick commerce and think it will outpace e-commerce in the long run. As more Indians get used to instant gratification, lots of businesses that were significantly dominated by e-commerce will move to quick commerce," Vora said. “We are focusing a lot of our energies into getting businesses to be a lot more focused on quick commerce rather than e-commerce."

Next-gen fund

Unlike other venture capital and private equity firms, Sixth Sense claims to be the first and only fund in India with a 0% management fee structure if a fund underdelivers. 

“I think this is the way the next generation of funds will be," Vora said. 

Funds typically charge management fees of 2-2.5% for handling the assets under management.

Founded in 2014 by Vora, Sixth Sense invests in different facets of consumer businesses, including products, services, distribution, and manufacturing. 

“The idea is to essentially invest in the next big disruptive brand in the consumer ecosystem," Vora said. “The space for these disruptors will accelerate quite significantly from where we are today."

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