Mumbai: US-based venture capital (VC) fund New Enterprise Associates Inc. (NEA), which raised $2.5 billion (Rs11,425 crore) in its 13th fund to focus on emerging markets, will allocate 15%, or $375 million, for investment in Indian firms, a senior company official said.
“Though (in India) we will be doing growth equity deals only, in some sectors we may enter early and do follow-on funding till we reach $50 million,” Bala Deshpande, senior managing director, said in a telephone interview last week.
The India portion of the fund will be invested over a period of four years, with a deal size of $30-80 million. “Our sweet spot will be the mid-market segment,” said Deshpande, who is the first Indian to become a general partner of the 31-year-old fund.
The new fund will also restructure its alliances in India. NEA-IndoUS Ventures—the early- to mid-stage VC fund that NEA had partly sponsored—will now be known as IndoUS, she said.
NEA-IndoUS, started in 2006 by Vinod Dham, Vani Kola and Kumar Shiralagi, when NEA had no direct presence in India, raised $189 million in 2007 and has invested in firms such as mobile phone marketer mGinger, movie rental service Seventymm Services Pvt. Ltd, and online gift service Myntra Designs Pvt. Ltd.
“Now since NEA has understood the opportunities in India and has a direct presence, they have decided to drop the NEA from the name,” said Deshpande. “We will be only NEA India and we are just on their advisory board and wouldn’t be involved in the operations.”
The services sector and the clean technology space are among sectors the company will invest in. “A whole lot of emerging services will come into play which were not attractive earlier just because they were not organized,” said Deshpande.
In India, NEA has so far invested in Delhi-based RT Outsourcing Services Ltd, a reverse logistics company that moves products from the consumer to the manufacturer for reuse or disposal, and more recently in Financial Software and Systems (P) Ltd, which provides systems integration services and software to the banking sector.
The NEA fund also marks a revival of venture fund-raising. The global financial meltdown that followed the September 2008 collapse of US investment bank Lehman Brothers Holdings Inc. dramatically affected the VC environment. The six months it took NEA to raise the fund is a reflection of that slowdown.
“Even funds with a good track record have found it difficult to raise money with many trying to raise funds since the past one year,” said Jagannadham Thunuguntla, equity head at Delhi-based investment bank SMC Capitals Ltd. “It is not good news for first-time fund managers. However, for the ones who have managed to raise money and invest in 2009-2010 they will get fair valuations and can at least expect modest returns.”