Bangalore: Vivek Madappa, chief executive of HummingBird Suites Pvt. Ltd, a Bangalore-based service apartment operator, has a new sales channel: its backer, Helion Venture Partners. Helion, which manages $350 million (Rs1,754 crore) in assets, invested $4 million in August in Madappa’s firm, and has since driven as much as one-tenth of the suites provider’s business.
New channels: HummingBird Suites CEO Vivek Madappa (left) and DFJ India CEO Mohanjit Jolly. Hemant Mishra / Mint
“Since our funding, we have grown by 250%. Our client base has risen from 70 to 320, of which up to 10% has come to us from Helion,” Madappa says.
Welcome to the world of family ties in the VC business. With a global economic slowdown, a slump in funding deals, expensive debt, and capital-raising difficulties seen in quarters ahead, investors are going the extra mile to help portfolio companies in generating revenues and garnering new customers.
The first step towards which has been to encourage the investee companies to take up each other’s services, work together if there is a synergy in their business offerings and introductions to prospective customers. “Investors will be more aggressive now as it has become crucial for them to make their companies successful in the current market,” says T.C. Meenakshisundaram, founder and managing director, IDG Ventures India.
IDG-backed Aujas Networks Pvt. Ltd, a provider of digital security services, and iViZ Techno Solutions Pvt. Ltd, which tests networks for hacking vulnerabilities, have also been working together since April. “With our complimentary services, we are now able to offer a larger number of services to our customers…something we would not have been able to do on our own,” says Sameer Shelke, co-founder and chief operating officer, Aujas, which caters to 15 customers. With a combined offering, Aujas says its prospects base has increased to up to 30 customers.
Elsewhere, Draper Fisher Jurvetson (DFJ) India’s executive director Mohanjit Jolly says the firm is targeting its portfolio companies with travel packages from Cleartrip Travel Services Pvt. Ltd, a firm it has funded. Jolly did not give further details on the collaboration saying it is too early to make a statement.
DFJ family’s Gingersoft Media Pvt. Ltd, which offers what is called a permission-based mobile marketing platform, mGinger, is also advertising for Seventymm Services Pvt. Ltd, a movie rental company that is also a DFJ-backed business. Seventymm had raised $12 million in its third round of funding from NEA Indo-US Ventures, Matrix India, DFJ and ePlanet Ventures in August.
“We are offering exclusive pricing deal for Seventymm. We, on the other hand, are getting extremely high response rate,” says mGinger chief executive Chaitanya Nallan. Nallan says a high point for advertising within the family is that Gingersoft can get both monetary gains and exclusive rights in such business.
Driven by the need to conserve cash, VC and private equity investors are also making a conscious effort to support investee firms by offering recruitment and financial consultation, sharing resources or even travel, insurance or personal computer purchases. Last year, when JiGrahak Mobility Solutions Pvt. Ltd was looking for a vice-president, it got a quick help from its investor Helion, who introduced Abhijit Bose to JiGrahak’s chief executive Sourabh Jain.
Today, JiGrahak, which provides mobile commerce solutions under the brand name ngpay, has at least four other senior executives recruited through references by its investor. “Helion is not just an investor for us but a group of seasoned professionals, who understand the needs of a start-up,” says Bose.
Besides hiring a human resources manager to help its investee firms, Helion has adopted what its managing director and co-founder Kanwaljit Singh calls a “collective portfolio approach” to help the firms it has backed in getting better deals for various services. It has engaged two audit firms and tied up with an Internet service provider for broadband services for all its firms. An investment adviser has also been taken on to help the portfolio companies in framing investment strategies.
With an aggregated approach, the portfolio companies can insist on deals for a lesser price, Singh says. “Due to the strength of their numbers, the companies can ask for senior support catering exclusively to them, which would not be provided if they reach out on individual basis,” he says.
DFJ, which has a global portfolio of at least 600 companies, has tied up with Dell Inc. for personal computers and Hertz Corp. for car rental services. “PCs and cab services are needed by every company. The idea is to make things easier and economical for the members of the DFJ family,” says Jolly, the VC firm’s executive director in Bangalore.
Jolly also helps his portfolio companies in recruitment and is working closely with a job consultant who zeroes in on US-based Indians looking to return to jobs in India and are prospects for DFJ’s investee companies here. “I lose my sleep if a top official of a portfolio company goes off. The success of a company depends on the execution capabilities of its team,” he says.
Norwest Venture Partners India, which has companies such as Adventity Global Services Pvt. Ltd, Persistent Systems Ltd, Suvidhaa Infoserve Pvt. Ltd and Yatra Online Pvt. Ltd in its portfolio, has one insurance broker who gets insurance cover for all its investee firms. “These kinds of initiatives are needed by every company. They are not just a need of a particular period,” says Niren Shah, managing partner at the VC firm.
NEA Indo-US Ventures has two consultants, who help the investor’s 16 portfolio companies with recruitment, employee stock option plans (Esops) structuring and human resource (HR) management. Senior associate Tripat Preet Singh says in case any top official of a portfolio company resigns, NEA Indo-US gets one of its own officials to take on the responsibility in the interim period.
For those among VC-backed firms who feel such aggregation may be intrusive, the option to opt out is always there. “It is a voluntary offer. If they do not want to participate, they are free to do so. We are extremely careful about it,” says Shah of Norwest Venture Partners.
Portfolio companies, on the other hand, see value proposition in aggregation. For instance, Sanjay Swamy, chief executive, mChek India Payment Systems Pvt. Ltd says it would make commercial sense for a VC firm and one or more of its portfolio companies to jointly negotiate for office space. Swami says with such an initiative, not only can start-ups get large work space, but can also share expenses for transportation, cafeteria and HR personnel.
Individually, these expenses become a bit too much for such companies, he says. “We can try to get benefit of being a small company but part of a big family.” Swami says he is exploring this idea with DFJ’s Jolly.