So far, the Menlo Park, California based venture capital firm has stayed on course. Its strategy for India hasn’t changed since it set up an office in Mumbai in January 2008.
It is the only Silicon Valley firm that continues to invest in India from a global corpus, and doesn’t feel the need to launch an India-dedicated fund. It remains squarely focused on both early-stage and growth deals. It invests across sectors such as technology, consumer Internet, healthcare and financial services.
Infrastructure used to be part of the mix but was phased out after it realized that it didn’t have the bandwidth internally for that sector. It doesn’t do too many deals at a time—in the last 10 years, it has deployed roughly $700 million across 33 companies. And, it has consistently delivered exits.
“We delivered exits fairly early on. Every year we deliver one or two exits. Because we’ve been able to do that, out of the 33 companies in the portfolio, we’ve had only three write-downs," says Shah, a former eBay Inc. executive who moved back from California 10 years ago to lead Norwest’s investments in India.
The firm’s most recent exit came in August, when Delhi-based digital media company SVG Media acquired the Mumbai-based ad network Komli Media’s India business for an undisclosed sum. Earlier, in July, it sold a part of its stake in online classified company Quikr through a secondary transaction. The stake was acquired by Swedish firm Investment AB Kinnevik. Shah declined comment on the details of the transaction but confirmed the sale.
In all, Norwest has delivered seven exits out of its portfolio of 33 companies. Apart from Komli and Quikr, the others involve business process outsourcing company Adventity, consumer lender Shriram City Union Finance, software company Persistent Systems, irrigation equipment maker Jain Irrigation Systems and mobile value-added services company OnMobile.
It may be argued though that despite the exit track record, Norwest comes across as a venture capital firm that has largely stayed on the sidelines of India’s most important start-up wave. For instance, barring Quikr, online travel company Yatra and furniture etailer Pepperfry, it hasn’t really made very many bets on the country’s exploding consumer Internet sector. In e-commerce, apart from Pepperfry, its only other bet is flash sales site Fashionandyou, and it may have to take a write-down on that investment, according to sources with direct knowledge of developments.
Shah has an explanation. “We consciously stayed away from horizontal e-commerce. We knew it would take billions of dollars to build those businesses and it wasn’t clear at the time where that money would come from. Yes, it may have looked like a miss then. But, we think it was the right decision," he says.
In the past few months, much of the later stage “hot" money that had aggressively moved into India in the last two years through hedge funds and strategic investors has all but disappeared.
As the Indian start-up market prepares for a downturn next year, or at least a correction, Norwest sees opportunities opening up, especially in terms of early-stage investments.
Early-stage deals currently account for 40-45% of the $700 million deployed by the firm in India so far. This will increase over the next two years. Some of the segments it will get into include consumer Internet, mostly vertical and offline-to-online plays, software-as-a-service, healthcare, Internet-of-things, and even wearables, if there are interesting opportunities. Since it isn’t constrained by a local fund, access to capital will not be a problem. Over the years, India had accounted for 15-22% of Norwest’s global fund corpus, depending on the kind of opportunities available.
However, the market correction will not see the firm drastically change its strategy and turn into an aggressive early-stage investor overnight. That may mean that even in the future, it will have fewer billion dollar valuation companies to show than some of its peers, but the India team isn’t losing any sleep over that.
“We’d do it the same way all over again. We don’t believe in the lottery model," he says.
These are parts of a multi-part series on 10 years of venture capitalists investing in India. Over the next few days, Mint will profile some of the most active venture capital firms in the country.