In early 2022, enterprise HR tech startup Darwinbox raised its Series D round, joining the unicorn club. Most observers saw it as a milestone for Indian SaaS, but for 3one4 Capital, one of its earliest backers, it was a defining moment in the fund’s lifetime.

The Bengaluru-based early-stage venture firm exited the startup with a 58x return from its seven-year-old debut fund — a rare feat in India’s venture capital ecosystem.

The latest exit is an equity sale of the fund’s partial shareholding in Darwinbox. The company closed a $140 Mn round led by Partners Group and KKR. Fund I registered an MOIC of 58.07x and an IRR of 65.08% on its exit.

But getting to this point wasn’t straightforward.

“We launched Fund I in 2016 after almost four years of research,” says Pranav Pai, founding partner and chief investment officer at 3one4 Capital. “It was the most difficult thing I’ve ever done in my life. I thought that would be the end of it. But surprisingly, even today, it’s just as challenging.”

All the more, 2016 wasn’t a rosy time to launch a fund. India’s venture ecosystem was still in its early innings. Tech IPOs were virtually nonexistent and startup exits were limited. India’s consumer internet bubble had just burst. Many global VCs pulled back. Yet that downturn became 3one4’s tailwind.

“Our timing worked out almost prophetically,” he says. “Because we launched during the crash, our entry valuations were highly affordable. For a $16 Mn fund, that was a huge advantage.

3one4 set a clear target: to return the fund — capital plus profits — within its 8 2 year lifecycle. Seven years later, it did.

Fund I is now fully returned with over 1.0 DPI. According to the firm, it is among the first Indian VC funds of its vintage to achieve this within the mandated timeline.

As of date, 3one4 Capital has four funds under management, with its most recent — Fund IV — launched in 2023 with a corpus of $225 Mn. So far, 3one4 has backed 100 startups and recorded 26 profitable exits across first two funds. “Fund II is now almost a 6- 7x fund,” Pai says. “It was more than double the size of Fund I and it performed much better.”

“When I say ‘profitable,’ I mean getting back more than INR 1 for every INR 1 invested — because anything less than that is not a profitable exit,” Pai explains.

These exits have come through various routes — secondaries, M&As, IPOs and buybacks. “We’ve had many 5-10x exits. The rare ones, of course, are the 50x returns. I think we’ll soon have our first 100x,” he adds.

Most of these exits occurred within six years of the initial investment. The firm follows a disciplined approach to liquidity, aligning exits with the fund’s lifecycle commitments. “The harder part is knowing when to exit,” Pai says. “It’s not just logistically hard — it’s emotionally hard. But your job is to return capital on time.”

But before all this came together — the exits and the returns — the biggest hurdle lay at the very beginning: convincing LPs to bet on an untested team building their first fund.

The Early Days: Setting Up The Foundation

“I’m an engineer by training,” begins Pranav Pai. “Did my undergrad in Bengaluru, then my master’s in Electrical Engineering at Stanford. My first job out of college was at a SaaS company in the Bay Area — I was employee number three.”

That early startup experience proved foundational. The company, which operated in the HR tech space and sold primarily to Fortune........

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