I am not a big fan of lists but sometimes they offer a better way to make a point, especially when one is attempting to do a wrap on an entire year.
To say that 2007 has been eventful would be an understatement. Early-stage investments by venture capitalists (VCs) came back with a bang. VCs experimented with funding models and investment themes. Consumer-based businesses rivalled technology-related businesses in deal activity.
Deal-making went pan-India instead of being restricted to pockets such as Bangalore and Mumbai. Silicon Valley’s oldest firms set up local offices after three years of flirting with the idea. And, even seed-stage funding has been fairly consistent, leading to an unprecedented boom in start-up businesses.
The numbers on early-stage investments will be out shortly. Compared with private equity, the venture numbers will be minuscule. I am estimating that somewhere between $700 million (Rs2,765 crore) and $900 million has been invested this year. It will still be a huge achievement for a market that was all but forsaken by faith investors three years ago. It is a good beginning to what I hope will be a sustained movement to power grass-roots entrepreneurship.
2007, which closes in less than a week, has played its part in kicking off the second phase of venture investing in India. But 2008 will be the year of venture capital—the $2 billion-odd estimated to have been raised for this market will complete most of its deployment, the first flush of exits from this round of investing will get under way and the last bunch of exits from the previous dot-com era will also be put to bed.
ILLUSTRATION: JAYACHANDRAN / MINT
While private equity will continue to have the higher ground in terms of investment numbers, the space to watch for excitement and the sheer power of change will be venture capital.
As we brace for all that excitement, here is my list of the top five VC teams and their respective firms to watch in 2008. I have picked them on the basis of their deal activity, their positioning in the market, their unique attributes as individuals and most importantly, their constant quest to differentiate and thus break new ground. So, here goes:
Sumir Chadha, K.P. Balaraj: The founder-duo of Sequoia Capital India still wins hands down when it comes to claiming the ‘first among equals’ tag in India’s venture capital industry. Their biggest credit is the fact that they continued to invest in local start-ups through the post-Internet bust nuclear winter, circa 2001-2003.
Of course, at the time they were known as WestBridge Capital Partners and Sequoia is a happy beneficiary of that legacy. Chadha and Balaraj changed tack in 2006 and got into growth investing but this year they came back to claim their spot as venture investors with the launch of a new $300 million early-stage fund. Good to have them back.
Kanwaljit Singh, Ashish Gupta, Sanjeev Aggarwal: These three gentlemen are the founding partners of Helion Venture Partners, which is the first venture capital firm in India to be created in the fashion of Silicon Valley firms. All three come from operating backgrounds and have strong credentials in building mature businesses. They operate as extremely involved investors. Their $140 million maiden fund, raised in early 2007, has closed more than a dozen deals so far. They started off with a clear focus on technology and have now broadened the theme to consumer businesses. The portfolio is an even balance among early-stage, mid-stage and seed deals.
Sudhir Sethi, Manik Arora: In terms of pushing the envelope on deal types, IDG Ventures India has stood out from peers for consistency. Founders Sethi and Arora invest from a $150 million fund and are earning themselves a reputation for start-up spin-outs. Last week, the firm invested in 3D Solid Compression, an Indian Institute of Science and Stanford University research project which has been spun out into a commercial business. Earlier, it invested in Sasken Communication Technologies Ltd spin-out ConnectM Technology Solutions Pvt. Ltd. The firm seeks out research projects, management teams and business units of large companies, which can be incubated and built into independent start-up businesses.
Avnish Bajaj, Rishi Navani: At a time when most venture capital firms setting up in India were still looking at technology, Matrix India Partners decided to focus exclusively on consumer businesses. They started with a $150 million fund, which has recently been beefed up to $450 million. Sequoia India was the only other fund at the time to focus on consumer businesses, but it always kept one foot firmly in technology. The singular consumer focus is now being followed by most venture firms currently active in India.
Promod Haque, Niren Shah: Among Silicon Valley firms, Norwest Venture Partners, has been the earliest to scope out India and invest here. Haque, in fact, can be credited with leading the return of Silicon Valley’s venture fraternity to India.
The firm has been a consistent investor here since 2004-2005 but waited till mid-2007 to set a local office and team under Niren Shah. It does not yet have a dedicated India fund, but given Haque’s bullishness of Indian start-ups, it may just be a matter of time.
Happy New Year!
Snigdha Sengupta is Mint’s resident expert on private equity and venture capital.
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