Mumbai/Bangalore: Over the last 12 months, slowly yet firmly, there has been a twist in the prism through which venture capital firms view the Indian market. Venture capitalists (VCs) are moving out of their comfort zone—technology and technology-enabled businesses—into unfamiliar sectors. The earlier focus on sectors such as IT and IT-enabled services, Internet and mobile value-added services (VAS) has now broadened to businesses as varied as voltage stabilizers (Servomax India Ltd funded by Mayfield Fund), logistics (Elbee Express India Ltd funded by Clearstone Venture Partners) and even organic farming (Sum-inter India Organics Pvt. Ltd funded by Nexus India Capital).
Helion Ventures Partners’ Kanwaljit Singh (left) and Matrix Partners India’s Avnish Bajaj (Photos by: Abhijit Bhatlekar and Madhu Kapparath / Mint)
Two VCs who set up shop in 2006 raised fresh funds in the last six-eight months and broadened their original intent. Matrix Partners India, which expanded into growth firms with fresh capital of $350 million (Rs1,449 crore), had started out with consumer services as its main theme. It is now looking at investments in ancillary companies in infrastructure and power sectors. Helion Venture Partners, which raised a $210 million second fund last month, will expand beyond tech and look at domestic consumer services across multiple sectors.
Mint surveys what, as commonly referred to in VC speak, is hot and what’s not:
New kids on the block
Products: Given its potential to disrupt existing technologies and rapidly grow, VCs have always preferred backing products. As domestic consumption goes up, VCs are hopeful product companies catering to home markets will emerge in the next few years. The last year saw some investments in software product companies such as 3D Solid Compression Pvt. Ltd, which was funded by IDG Ventures India, and hardware product firms such as Trivitron Diagnostics Pvt. Ltd that got funded for $11 million by ePlanet Ventures and JSBC Private Equity Asia Ltd.
Energy: Despite all the hype around clean technology, very few investments have been made on-ground here. VCs say that while the demand-supply gap is obvious, the gestation period (for the sector to mature) is long. “It is a sector that requires (government) intervention and policy-setting,” says Rahul Khanna, director, Clearstone Venture Partners.
Nexus India Capital’s Sandeep Singhal (left) and Clearstone Venture Partners’ Rahul Khanna (Photo by: Abhijit Bhatlekar / Mint)
Infrastructure-enabling firms: Investors are bullish on ancillary companies plugging into the booming infrastructure scene in India. While few deals have happened, VCs say they are beginning to see deal flow in this space. “Infrastructure and power used to be late-stage PE play, but now we are finding small and mid-staged companies (catering to) these industries,” says Avnish Bajaj, managing director, Matrix Partners India.