Mumbai: Palo Alto-based Norwest Venture Partners (NVP), one of the first Silicon Valley venture capital firms to start investing in India two years ago, will acquire a direct presence in the country this September which would result in “a greater focus on the India market,” according to Promod Haque, the firm’s managing partner. The local office, which will either be in Bangalore or Mumbai, will have three partners on the ground driving investments.
NVP’s move comes close on the heels of the firm’s high-profile exit from US-based ethernet company Yipes Enterprise Services Inc., which was acquired by Reliance Communications Ltd for $300 million (Rs1,212 crore) on Monday. This is NVP’s first US-India cross-border M&A exit, although the investment was not planned as one.
The cross-border space has been a key focus for NVP’s investments since the firm started investing in India two years ago. NVP’s sector focus continues to be on enterprise, knowledge process outsourcing, consumer Internet and product companies.
The firm has no plans of raising a dedicated India corpus, and will continue to invest out of the global $650 million Norwest Venture Partners X (10th) fund that was launched in 2006. Over the past few years, NVP has invested close to $300 million in 27 firms that are either Indian or American with an India connection. Of this, only five have been direct investments in Indian companies (worth $70 million). These have been in online community website Sulekha.com, travel portal Yatra.com, mobile value added services company Mobile2win, knowledge process outsourcer Adventity and software services firm Persistent Systems.
With NVP establishing a direct presence in the market, the ratio of investments into Indian firms will increase. “At least half of these (the new investments) will be direct investments into India,” says Haque. The firm will invest across early-stage and late-stage companies and deal sizes will vary from $1 million to $50 million.
Yipes, which will now be a 100% subsidiary of Reliance Communications-owned Flag Telecom, is a start-up that NVP incubated in the US in 1999. At the time, the company comprised of two engineers with an idea to simplify connectivity for extended enterprises (a company with offices in several locations, for example). Yipes now offers end-to-end ethernet (a standard used to connect LAN networks) solutions for enterprise customers, including Nasdaq, the New York Stock Exchange and the London Stock Exchange. The company had several rounds of investments prior to acquisition.
Since 2002, Yipes has raised $94 million in funding. Besides NVP, which is the largest investor, Yipes has received funding from the Sprout Group, JP Morgan Partners and Crosslink Capital. The four investors owned a majority stake in the company. The company will touch $100 million in revenues in 2007-08.