Bangalore: India will soon have its first online market for the venture investment industry, offering a single platform for fund seekers, investors and other stakeholders to announce their requirements.
The India Venture Board (IVB) will facilitate primary investments, secondary liquidity and stake sales by venture capital (VC) and private equity (PE) investors.
The idea was “triggered by the fact that we need to get the whole VC ecosystem on a common platform”, said Mahendra Swarup, president, Indian Private Equity and Venture Capital Association (IVCA). “It’s a very disorganized sector. A lot is happening outside the top cities. The issue is how to bring these opportunities to light.”
The board, which will be operational in a couple of days, is a collaboration of IVCA, the National Stock Exchange (NSE), the Small Industries Development Bank of India (Sidbi), the Indian Angel Network and Mumbai Angels.
IVCA is a grouping of about 80 VC and PE firms. The two angel networks collectively represent about 200 individual investors, who are mostly rich businessmen and executives looking to invest in very early stage companies.
The board will have three forums: one for entrepreneurs and unlisted companies to make their pitches to investors and investment banks in a secured manner; an announcement board for investors, investment bankers and incubators; and a “deal corner” where participants can post primary and secondary investment calls.
The platform will also eventually facilitate liquidation of employee stock ownership plans. “The early stage, growth-stage investors find it difficult to wait till the listing actually happens,” said Swarup. “Exits in India are through public listing.”
In VC parlance, the secondary market is where an investor purchases stakes from an existing investor in a company rather than from the founders.
Online markets such as IVB are well developed in countries such as the US, where venture boards such as Shares Top allow trading on their platforms. Investors can participate in the process only by invitation. IVB is initially sending invites to 100 investors and 12 intermediaries such as investment bankers. Companies seeking investments do not need an invite to put up their requirements.
But the board will require participants to be endorsed by IVCA, or the two angel networks, and insist on companies posting documents on their business plans and credentials on its website. Services will be free initially, but IVB will charge a transaction fee once secondary deals begin to be announced. For now, it is funded by IVCA, Sidbi and NSE.
Swarup expects about 1,500 start-ups, about 100 VCs, 100 intermediaries, and 250-300 angel investors to be a part of the platform in the first year.
“Deployment of capital is very slow,” said Swarup. “We are sitting on $30 billion dry powder (capital not invested). This platform will speed up the deployment process.”
For VC firms, the platform will offer access to deals beyond their own network. “We will look at the platform to know what is going on in the market,” said Sudhir Sethi, chairman and managing director, IDG Ventures India. “It’s a more efficient, faster way of connecting with all the participants of the investment ecosystem for sharing information.”
For investment banks, the board will increase competition as a larger number of intermediaries will scout for deals announced on the platform; it will mean greater information sharing. “To make the platform more meaningful in the longer term, it’s crucial that substantial information like company information, backup numbers are shared besides their industry and fund requirements,” said Sunil Jain, vice-president, Mape Advisory Group Pvt. Ltd, an investment bank.