Mumbai: Norwest Venture Partners (NVP) India, the venture arm of US-based NVP which manages more than $3.7 billion in capital, is expanding its investment strategy in India to include seed- and late-stage transactions.
The firm, which has so far looked at venture and growth stage deals here, is also broadening its areas of interest from banking, financial services and insurance, infrastructure and technology to include healthcare, education and food companies.
NVP India has started its own seed programme under which it will look at backing Internet and mobile starts-ups, investing up to $100,000. It will not raise a separate fund for this programme and will invest from its global fund.
“Earlier, we had to let go of such companies saying they are too small. We have realized that it’s important to catch a company early on and help in their journey forward,” said Niren Shah, managing director, NVP India. The investment firm is open to doing these deals in collaboration with other funds. It is looking at investing in two to three such companies a year.
There is also another reason for the new focus. It is becoming difficult to get into series A (or first institutional funding round ) or B (the subsequent funding rounds) later as valuations cited are often too high, Shah said.
He further attributes the growing comfort for seed-stage deals to the increasing validation of venture investments in India in terms of returns and exits.
“These companies are doing well, there have been significant up-rounds and quite a few are close to offering exits,” Shah said.
NVP India has, so far, invested over $300 million in India in 16 transactions. For growth equity opportunities in India, NVP typically invests between $15 million and $35 million and as much as $75 million in each transaction. For early and mid-stage companies in India, NVP tends to invest between $2 million and $15 million. It is currently looking at adding three more specialists in the field of healthcare and food.
Some of its prominent portfolio companies include NSE (National Stock Exchange of India Ltd), Yatra Online Pvt. Ltd, Asian Genco Pte Ltd and Ratnakar Bank Ltd. The fund has invested in at least five companies this year.
NVP India is also going to focus a lot more on late-stage investments. “We are entering the phase when a lot more deals will come back into the market,” said Shah, referring to the tendency that founders tend to hold on to their capital raising plans in a volatile market.
Investors in India are increasingly taking up a stage agnostic approach. Recently, Silicon Valley-based global venture capital firm Draper Fisher Jurvetson (DFJ), which has focused on early-stage deals in India, decided to adopt a more stage-agnostic approach in the country. DFJ Growth Fund, a partner fund that focuses on growth-stage deals in the US, has started looking for a pipeline in India.
Experts say investors want to see returns on their investments and if the portfolio is a mix of both start-ups and mature companies, they can see periodic exits and shorter horizons.
“In India, it is difficult to get enough investment opportunities in one stage. And, people do not want to leave out any investment prospects,” said Deepak Srinath, director of Bangalore-based boutique investment bank Viedea Capital Advisors (Pvt.) Ltd.
Srinath said availability of unrestricted capital in terms of stage, would be good for companies seeking funds, even within the portfolio. “This strategy makes more sense in India as by adopting a stage agnostic approach, one is derisking their investment thesis. With growth-stage deals, investors can look forward to lesser risks, more or less guaranteed returns and shorter exit horizons. With early stage deals, they can look at blockbuster exits.”
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