Mumbai: Few people are as plugged into the US Silicon Valley’s venture capital-backed start-up community as SVB Financial Group. The $5 billion (Rs19,750 crore) financial services group, conceived by a group of former Bank of America executives in 1983, has built a successful business model around technology start-up businesses.
In the next three to six months, the Santa Clara, California-based outfit’s India arm, SVB India Advisors Pvt. Ltd, will push through the most significant phase of its game plan for India—one that has been in the making for more than three years since a quiet entry in early 2004.
And that is investing and lending, sums up Ash Lilani, head, SVB Global, the group’s holding subsidiary for international businesses. The investing part is already under way. SVB recently launched the $54 million SVB India Capital Partners Fund, led by Lilani and Suresh Shanmugham, and has already notched up six deals. Lilani, though, emphasizes that the fund does not compete with venture capital firms investing here.
“We have a clear strategy to co-invest with specific funds active in this market. We do not lead deals,” he says. It has co-invested alongside venture capital firms such as Sequoia Capital India, Canaan Partners and Matrix Partners India.
The emphasis on co-investment deals is not without reason. In the US, SVB Financial Group, through its five lines of business, including commercial banking and venture capital investing, counts more than 500 venture capital firms among its 11,000 clients. Its remaining client base consists of start-up and mid-stage technology companies, a large number of which are venture-backed. The venture capital investing business manages $1 billion in committed capital and invests directly in companies as well as in other funds.
Commercial banking accounts for 70% of its overall business. But the company is less forthcoming about plans for its flagship business here. “We do have plans to lend in the near future and also hope for a full banking licence in due course,” Lilani says. Venture lending is a new concept in India and requires a different approach. “The risk is different because you don’t have a finished product. We understand start-up risk. That is our core competence,” says Ajay Hattangadi, senior vice-president, SVB India. But while technology has been its focus in the Valley, in India it would also look at non-technology start-ups. “Our model will be different here. We will look at enterprise value instead of just IP (intellectual property) value,” he says.
Incidentally, only 15% of the $54 million India fund corpus is from the group’s proprietary balance sheet. The external limited partners (institutions that invest in venture capital funds) invested in the fund see it as an entry vehicle, something that is not new for SVB. Lilani had headed a December 2003 delegation of frontline Silicon Valley venture capital firms, including New Enterprise Associates, Battery Ventures, Bessemer Venture Partners and Sequoia Capital, which came here on a reconnaissance mission to assess investing opportunities. “We helped 22 of those VC firms discover India and today, half have set up shop here,” says Lilani. He now hopes that just as the company broke new ground with that mission by playing a pivotal role in driving venture investing back to India, it will be able to do an encore with venture lending.