Bengaluru: Venture capital firm Cornerstone Ventures is targeting the second half of 2027 to launch its third fund, potentially raising up to $250 million as it looks to increase investments in deeptech and artificial intelligence (AI).
The Mumbai-based company is also looking to exercise the greenshoe option on its second fund, Abhishek Prasad, managing partner at Cornerstone told Mint in an interview.
“We are going to wait out for some of these results from fund two. Because fund two will most likely wrap up by the end of this year or a few months into next year,” said Prasad.
The plan to raise a larger fund shows how venture capital firms in India are eyeing larger investment vehicles that can write bigger cheques for portfolio companies. Cornerstone is considering a Fund III that could be about $50 million larger than its second fund, with $250 million as the upper limit. The firm expects to limit the portfolio to no more than 20 , allowing it to remain closely involved with its investments.
“We don’t want to keep going crazy saying, add more money because the more money, the harder it is to multiply,” said Prasad, referring to generating returns for limited partners.
bets have traditionally been a smaller pool of the firm’s investments. Just six out of 21 from the $50 million Fund I, and about 10-15% of the $150 million Fund II. On the early-stage front, the firm’s allocation to deep tech will remain between 10% and20%, similar to the second fund.
Cornerstone will retain its traditional business-to-business focus but plans to increase its exposure to higher-risk, potentially transformative . “A lot of deeptech areas will be moving towards commercialisation. As a result, we’re going very deep into understanding space and advanced manufacturing,” said Prasad. The firm is also exploring AI startups building verticalised solutions. In fact, AI in the services sector has become an area that several VC funds have become bullish on.
Firms like Bessemer Venture Partners have created a roadmap to back early-stage companies disrupting India’s $283 billion IT services industry. Other firms scouting opportunities in AI services include Peak XV Partners, Stellaris Venture Partners, Accel, and Elevation Capital.
Tapping greenshoe
Cornerstone announced Fund II in 2024, sized at $150 million with a $50 million greenshoe option. The plan was to build a portfolio of 15-20 startups across both early- and growth-stage companies.
The firm has decided to tap the greenshoe option, which would settle the fund at $170-200 million, depending on how the next few months of fundraising play out.
“Half the portfolio is built. We’ve got eight investments, some are repeat investments from Fund I who we saw as winners. Some are the larger cheques that are a part of the new strategy we adopted in Fund II,” Prasad said.
Cornerstone’s maiden fund focused purely on making early-stage bets, while Fund II made investments in growth-stage companies as well. The shift in strategy was to create quick liquidity for their limited partners even as some of their early-stage bets generate returns over a longer period of time.
In Fund II, the firm invested in Hiranandani-backed AI data centre company Yotta as well as B2B e-commerce and financing for manufacturing platform OfBusiness. Both are expected to head to the public markets soon.
Exit phase
Cornerstone’s first fund, sized at $50 million, is entering its exit phase. Of the 21 companies in the Fund I portfolio, six were deeptech bets, which continue to scale. The remaining 15 were more traditional software-as-a-service-style bets. Cornerstone has exited three of these companies, while two more exits are in the final stages.
The completed exits include CreditNirvana, acquired by Perfios last year; Wigzo, acquired by Shiprocket in 2022; and Intelligence Node, acquired by advertising holding company the Interpublic Group in 2024.
“With the five, including the two that are closing, our DPI will touch about 80%,” said Prasad. “The average multiple on these exits is about 2.7-3.3x, which is where these five exits have happened.”
DPI, or distributions to paid-in capital, measures how much cash a venture fund has actually returned to its investors relative to the money they put in. A DPI of 1.0x means investors have got their capital back, while anything above that is realised profit, as opposed to paper gains that only show up in a fund’s valuation.
Of the remaining 10 companies, Cornerstone expects at least three to head to the public markets in the next three years. The others will see private equity style roll-ups or strategic exits.