Ironclad Ventures is a new investment manager in Delhi-based with an investment strategy to give participants in startups’ employee stock ownership plans, or ESOPs, an opportunity to cash in on the value of their shares before a company is ready for a more traditional exit, such as being acquired or going public. The play for investors is a stake in India’s high-growth startups for which traditional equity rounds are competitive and dominated by larger investment funds.
Ironclad Ventures is launching with a goal of raising two billion rupees ($22.5 million) for the employee secondaries fund. The firm is led by first-time fund manager Krishna Killa, a private equity professional turned entrepreneur who for eight years led an online pharmacy and delivery service.
“My own journey as a founder played a big role,” Killa told ImpactAlpha. “I saw first-hand how powerful ESOPs are in attracting and retaining talent, but also how often employees struggle to realize tangible value from them. For many, equity remained ‘paper money’ with uncertain liquidity.”
The fund has anchor commitments from several Indian family offices, which Killa declined to name, as well as individuals.
Exit pathways
The target fund-size would allow Ironclad to take small stakes in 30 to 40 Series B-stage companies. Because of the relatively small size of its deals – $100,000 to $500,000 each – Killa says Ironclad will have opportunities to exit sooner than a traditional VC firm.
Ironclad Ventures will only acquire minority portions of ESOPs; employees can still retain most of their shares and benefit from growth in their companies’ value.
“We believe we can deliver strong returns while solving a real pain point for the ecosystem,” said Killa.
Wealth creation
A goal for Ironclad – in addition to financial returns – is to become “a catalyst for more inclusive and durable wealth creation” in India’s startup ecosystem.
“Employee ownership is one of the most meaningful ways to broaden wealth creation in India’s innovation economy,” Killa said. “By providing liquidity without forcing premature exits, we enable employees – often first-generation wealth creators – to unlock financial flexibility.”
