Mumbai: Canaan Partners, an early stage technology-focused venture capital (VC) firm, is looking to exit four of its Indian portfolio companies over the next 12-24 months.
“Four of our investments are now approaching scale and maturity, and might be potential exit candidates over the next couple of years,” said Alok Mittal, managing director, Canaan India. These companies are iYogi Holdings Pvt. Ltd, Bharat Matrimony.com, UnitedLex Corp. and e4e Inc.
Canaan Partners has so far deployed $120 million (Rs 536 crore) in India across 10 transactions over the past five years. Globally, Canaan has $3 billion under management and has made 135 exits since its inception in 1987.
The firm has already partially exited e4e by selling the company’s managed service business to a strategic investor. Mittal declined to name the strategic investor.
Canaan, along with other investors, had invested $27.6 million in iYogi, $20.4 million in Bharat Matrimony, and $6 million in UnitedLex.
“The VC market in India took off in 2005-06, so now the industry will see some exits, and in two-three years time, investors in Indian VC will see fund-level returns.” said Mittal.
According to Sanjay Anandaram, founding partner of JumpStartUp Venture Fund and who is an entrepreneur-turned-investor and mentors start-ups, there is a lot of momentum being built behind VC-backed companies as they have received a lot of traction in the market because of Internet penetration, client acceptance, and an increase in domestic consumption.
“Today, with the success of MakeMyTrip’s listing, the question for VC investors is whether they should list the company in India or abroad,” he said.
There have been 43 exits worth $289 million in 2010 compared with 11 VC exits worth $58 million in the previous year, according to data from VCCEdge, a financial research platform. In 2011, there have been nine VC exits worth $168 million.
Apart from making exit plans, Canaan is actively scouting for investments in e-commerce and bill payment services such payment gateways.
Explaining the rationale behind investment in bill payment services, Mittal said: “The Reserve Bank of India (RBI) has now allowed mobile payment for some transactions, so we will invest in the technology that will facilitate the payment.”
Another interesting aspect that makes the sector attractive for them is that RBI-set up National Payments Corporation of India and has proposed a unique India transaction gateway card, that will be known as the Rupay card, he said.
“This will be a domestic equivalent of global payment processing firms like Visa and MasterCard, and will allow opportunities for new payment technology companies to come up,” Mittal said.
There have been very few VC investments in bill payment services. Some of them include $10 million invested in Itz Cash Card Ltd by Matrix Partners India, Intel Capital and Lightspeed Venture Partners, and $7.5 million in BillDesk by Clearstone Venture and other investors.
“Investment in this area has been limited because investors were sceptical about when the physical commerce will take off and also the regulations relating to it were unclear,” said Anandaram.
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