Consumer-focused investor Sauce VC, which has supported new-age luggage brand Mokobara, healthy foods startup The Whole Truth, and pet care firm Supertails, has launched its third fund aiming to raise Rs 250 crore, founder and managing partner Manu Chandra told ET. The New Delhi-based firm received approval from the Securities and Exchange Board of India (Sebi) recently, and plans to support 15-16 early-stage consumer brands with this new fund.
This launch occurs amidst growing interest in the direct-to-consumer (D2C) space from risk capital investors, including those focused on tech. Sauce VC aims to raise most of its capital from domestic limited partners, including its existing backers like family offices and corporate houses focused on consumer sectors.
Sauce VC’s first fund was Rs 60 crore, closed in 2019, and the second was Rs 158 crore, closed in 2021. The firm also raised a Rs 260 crore continuity fund to support successful investments from earlier funds. However, Chandra mentioned that the firm will now forgo raising continuity funds, opting instead to make larger investments from the main fund.
“We aim to maintain consistency with this new fund in terms of stage, sector, and size,” said Chandra. “Sauce VC has developed a robust ecosystem and proven strategies to grow brands from the idea stage to Rs 150-200 crore scale. We made early investments in Mokobara, Hocco Ice Creams, The Whole Truth, and others.”
With Fund-III, Sauce VC plans to write cheques in the Rs 3.5-4 crore range, compared to the Rs 2-2.5 crore investments of earlier funds. Chandra noted the increase in ticket size due to advancements in last-mile infrastructure, technology, and payment systems, enabling consumer brands to scale more quickly.
Sauce VC will stay focused on the consumer sector and keep its fund size relatively small compared to other venture firms. For instance, DSG Consumer Partners raised a $114 million fund in October 2023, while Fireside Ventures closed a $225 million fund in October 2022.
“The domestic consumption opportunity in India is vast,” said Sauce VC’s partner Yash Dholakia. “Limited partners are eager to invest across stages. Our differentiated approach of early, concentrated bets is proving effective. We aim to support the ecosystem by taking startups from 0 to 1 and then partnering with larger investors for subsequent rounds.”
Chandra added that Sauce VC will target startups in large market segments with dominant incumbents who tend to grow through market penetration rather than innovation. “Older brands struggle to cater to emerging consumer segments, which creates opportunities for younger brands targeting specific niches to grow successfully,” he explained.
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