Mumbai: Silicon Valley’s biggest venture capital (VC) firm, Kleiner Perkins Caufield and Byers (KPCB), invests in India jointly with Sherpalo Ventures Llc., which was started by Ram Shriram, famous for playing early investor in Google Inc. The partnership KPCB and Sherpalo Ventures, led by Sandeep Murthy in India, made its first investment in 2005 in Cleartrip Travel Services Pvt. Ltd.
In 2007, while VC investments hit a record high in India, the firm took it slow and played it quiet: It funded two ventures, FutureBazaar.com, the e-commerce portal owned by the Future Group, and education portal Studyplaces Inc., both of which were only announced this year. This was in contrast to the five investments it made in 2006 in Info Edge (India) Pvt. Ltd, mobile commerce firm PayMate India Pvt. Ltd, animation company Prana Studios Inc., navigation provider CE Infosystems Pvt. Ltd, which owns portal Mapmyindia.com, and a second round funding for Cleartrip.
This year, KPCB and Sherpalo have made three investments in the first four months — an undisclosed amount in photosharing and printing services start-up Zoomin Online (India) Pvt. Ltd, $7.1 million in mobile advertising company mKhoj Solutions Pvt. Ltd, and a co-investment with lead investors Draper Fisher Jurvetson and the Mahindra Group in an $18.5 million third round funding for Cleartrip.
Murthy, who also plays an operational role as Cleartrip’s CEO, spoke to Mint about KPCB and Sherpalo’s investment plans and expanded focus. Edited excerpts:
You have been more active this year compared with the last. Are you stepping up investments?
In 2007, there were more VCs in the market and it was very clear to entrepreneurs that there is money here. Investing became harder because there were so many (start-ups) to filter out and find the really good ones. We don’t have a pile of money we have to invest, so there was no pressure. We made several investments in 2006, maybe as a function of the fact that there were fewer funds and fewer entrepreneurs. Only those really serious about starting a business got into it. But 2008 has started faster again and it’s more like 2006 for us. It is looking like a good year.
Changing pace: Sandeep Murthy of KPCB Sherpalo Ventures.
Do you plan to broaden your sectoral focus this year?
Our focus remains consumer-oriented tech companies. As the market turns more competitive, it is important to focus on a core area and our investments reflect that. This year, we will also start to leverage KPCB’s strong perspective on energy and look for companies in that space here. There are no (energy) deals in the pipeline yet. We are more in the learning phase. We need to learn things from scratch, from how it is distributed to how to manufacture components required. The India market will not necessarily be differentiated by technology, but based more on figuring out efficient distribution models.
Most of your investments are first rounds for the start-ups. Will you continue looking for such deals?
Yes, we like to get in early and show that a business model can work. Series-A is when you can make the maximum impact on a company’s decisions, and that is most exciting for us.
Revenue models for mobile advertising are unproven and often debated, as it is a nascent space. Why have you invested in mKhoj?
They were able to show us not only ad inventory, but also advertisers on board. Unlike Cleartrip, which was basically a business plan and three entrepreneurs, they had been operating for seven-eight months, so it was more than just a concept. We have seen the model in other markets, and we believe the notion of mobile for accessing the Internet is moving in the right direction here too.
Are you looking at adding partners to the firm?
Not at this time.