Cedar Hill Capital, a venture capital fund focused on B2B technology for financial institutions, is targeting a portfolio of around 15 companies as it expands investments in AI-led enterprise software. The fund considers USD 10 million in annual recurring revenue (ARR) a meaningful milestone for its early-stage portfolio companies, according to Sahil Anand.
The fund, which has a corpus of around USD 20 million, has made five investments so far, with its final close currently in process. It plans to make two additional investments over the next few months, followed by further investments aligned with its focus on pre-Series A B2B fintech companies serving banks, insurance companies and other financial institutions.
“We are looking to invest, and we are investing actively in B2B software or B2B technology that is leveraging AI for banks and insurance companies and financial institutions,” Anand said.
Cedar Hill Capital is targeting legacy financial services infrastructure, where institutions continue to rely on traditional software and systems for payments, databases, cybersecurity and fraud management. Its investment areas span digital banking, payments, cards, fraud management, cybersecurity and lending software.
The fund is looking to back companies that can disrupt these existing systems through differentiated technology and scalable enterprise solutions.
USD 10 Million ARR A Key Portfolio Milestone
For Cedar Hill Capital, revenue visibility and predictability are among the key indicators of a company’s long-term potential. Anand said the fund expects its portfolio companies to build recurring revenue streams, secure long-term contracts and expand beyond India.
The fund considers product-led revenue, international customers, dollar-denominated revenue and strong customer relationships important indicators of business maturity.
“We expect these guys to basically have recurring revenue. I think that’s the most important,” Anand said.
He added that reaching USD 10 million in ARR would be a significant milestone for an early-stage company, providing a strong foundation for subsequent funding rounds.
“USD 10 million of ARR is very meaningful. USD 10 million of ARR will help them do a very successful Series A and Series B round,” Anand said.
The fund is also prioritising predictable product revenue over services revenue, with a preference for companies that can demonstrate consistent growth and expand into international markets.
AI Enterprise Software Must Have A Clear Use Case
As AI adoption accelerates across financial services, Cedar Hill Capital is looking for companies with defined customer profiles and commercially viable products rather than businesses still experimenting with broad platforms.
Anand said companies with a clear use case, a productisation strategy and an identified customer persona are better positioned to scale.
“I think the ones that struggle to scale are the companies that only have a platform and have not yet figured out who their customer is and what the use case is,” he said.
The fund also evaluates early revenue traction, the strength of the founding team and the presence of a core management team beyond the founders. It looks for a unique selling proposition or a competitive advantage that makes the product difficult to replicate.
Anand said Cedar Hill Capital has an active pipeline of companies, supported by its domain access in financial services, portfolio company references and relationships with founders.
Data Security Emerges As A Key Investment Consideration
Anand said financial institutions are increasingly prioritising data security, data protection, on-premises deployment and data integrity while evaluating AI-driven enterprise solutions.
The growing awareness around data leakage and cybersecurity risks has influenced how financial services companies approach technology partnerships, he said.
“We’ve seen a very large awareness from all these founders for wanting to work with the banks and be fully protected when it comes to data security and data protection and DPDP and all the laws in regard to data,” Anand said.
The fund sees cybersecurity and fraud detection as potential areas for the next generation of enterprise software companies, particularly as AI is increasingly being used in cyberattacks.
Anand said solutions that protect financial institutions and customer data from cyber threats and fraud could become valuable investment opportunities.
Profitability Remains A Longer-Term Goal
Cedar Hill Capital does not expect its early-stage portfolio companies to achieve profitability immediately, as businesses at this stage continue to invest in growth and may be burning cash each month.
Anand said profitability typically becomes a more relevant consideration around the Series A or Series B stage, when companies begin to reduce their cash burn and work towards becoming cash-positive.
He added that the scalability of enterprise AI businesses would depend on their ability to enter new markets, acquire customers and expand their use cases.
Pointing to established financial technology companies such as Perfios, M2P, TransBank and Intellect Design Arena, Anand said the segment has the potential to build businesses generating hundreds of crores of rupees in annual revenue.
Revenue Remains The Primary Measure Of Value Creation
Cedar Hill Capital expects to continue investing in pre-Series A B2B fintech companies serving financial institutions over the next three years, with its remaining investments aligned with its existing thesis.
Anand said the fund’s portfolio construction would continue to focus on companies with strong revenue potential and scalable business models.
When asked how the fund measures value creation across its portfolio, Anand said revenue remains the most important metric.
“Honestly, revenue. Because now revenue is the only thing that is starting to count. I think all investors have realised that valuation is just on paper,” Anand said.
He added that while valuations and future funding rounds remain relevant, revenue is the primary indicator of a company’s business performance.
