Mumbai: Palo Alto, California-headquartered venture capital firm Norwest Venture Partners opened its India office last September aiming to ramp up investments with a local team on ground. While peers such as Draper Fisher Jurvetson and NEA IndoUS Ventures have struck deals rapidly in the last year, Norwest, with two India partners, is yet to make its first investment locally. It had earlier invested from the US in five companies including software firm Persistent Systems Ltd and online classifieds portal Sulekha.com.
Last week, it led Charles River Ventures and Tata Capital Ltd in a $32 million (Rs142 crore) second round investment in Cambridge, Massachusetts-headquartered telecom software company Vanu Inc., a company founded by Vanu Bose, son of Bose Corp. founder Amar Bose. This deal too was from the US.
In an interview, the fund’s managing partner Promod Haque talks about the Vanu deal, how it is adding a third India partner, and will announce local deals next month. Edited excerpts:
What will the investment in Vanu go towards?
Vanu is a US company (but) this round will be used to expand operations in India. Right now, there is a sales office in Gurgaon and a development centre in Bangalore. The funding will go towards expanding marketing and sales support operations. Software-defined radio, which Vanu is working on, lets operators use normal computer servers to run CDMA (short for code division multiple access, a technology platform for mobile phone services) and GSM (a rival technology platform) networks, and change from one to the other without the expensive hardware changes. As operators go into rural areas and new licences are handed out, India will be an important market.
Why has Norwest not struck any deals since it set up office here a year ago?
The deal flow is pretty good, no different from the US. Of the companies out there, 20% will work, 80% will go out of business. For us, the big challenge is how to do deals (in start-ups) that will grow to be large companies, and not to be part of that 80%. We don’t push new people to invest right away, we want them to learn our process. We will be announcing deals in the next month and adding another India partner.
Persistent Systems has deferred its initial public offering (IPO). Are public listings on hold for your portfolio companies now?
I think it is fair to say there is lower demand from the public market. Look at Nasdaq, Dow Jones or Sensex. We had a fairly large IPO in the US three weeks ago, with a company called Rackspace, but at valuations lower than one or two years ago.
We’ve had to put a lot of IPOs on hold, because our entrepreneurs and investors don’t like the valuations. Right now, the public market is gun shy. When the demand is weak and prices are low, we are better off waiting.