Mumbai-based venture capital firm Nexus India Capital struck two deals this month. It invested $6.5 million (Rs25.7 crore) in embedded product design services company Mistral Solutions Pvt. Ltd along with JAFCO Asia and co-invested with Fidelity International Ltd on a $20 million funding for managed IT services provider Netmagic Solutions Pvt. Ltd. Netmagic was part of the portfolio of equity stakes Nexus bought from eVentures India in December 2007.
Rupert Murdoch-promoted eVentures was an active fund in the dotcom era of 1999-2001 and shut operations in 2003. Nexus, which has a $100 million dedicated corpus, has invested in eight companies apart from the portfolio buyout, including online ad network Komli Inc., Web conferencing company DimDim Inc. and voice SMS company Kirusa Inc. Nexus co-founder Sandeep Singhal talks to Mint about the firm’s latest deals and plans for the year ahead. Edited excerpts:
You bought eVentures’ stake in NetMagic last year. Why the fresh investment now?
NetMagic wanted to expand further, as there is demand from clients in India for domestic bandwidth. Earlier, its operations were mostly in Mumbai, where its data centre was located. But the company opened a centre in Bangalore after we bought the eVentures stake. Now it wants to go national, it is close to identifying sites in Chennai and Delhi. So we did a follow-on round of investment along with Fidelity.
The deal size was unusually large for you. Are you exploring growth deals as well?
Not actively. We will do growth deals only if it is a company we understand well and have a preferred relationship with them. Otherwise, we will stick to early-stage deals. In the lifetime of a company, we plan to typically invest $10-15 million.
Will you do follow-on investments in the other companies on the eVentures portfolio?
Not immediately. The other three companies—Contest2Win, Games2Win and Connecturf—have enough funding for now.
Mistral, the other company you’ve invested in, has been around for 10 years. Why venture capital at this stage?
Mistral is moving from services to intellectual property-related embedded design. They had a round of funding from eTEC Ventures in 2003, but the team was looking for a value-added investor to help them in overseas markets.
On the Nexus side, Naren (Gupta) will bring in US contacts, while Jafco will help with Far East relations.
What sectors do you find interesting this year?
We have investments in the pipeline in the online space. We like Internet companies, but they should have a data component.
We are also looking at the mobile VAS (value-added services) space. In both these sectors, we look for companies creating IP. We would also like to make a couple of clean technology investments.
Within clean tech, what kind of companies will you invest in?
We will stay away from biofuels companies, as we believe the market is ahead of the curve and valuations are high. We would like to invest in water recycling.