SAIF Partners raises new $350 million fund
SAIF Partners will invest 15-20% of the new fund in public companies
Bengaluru: Venture capital firm SAIF Partners has raised a new fund of $350 million and will maintain its varied investment strategy of picking up stakes in both private and public companies and in both technology start-ups and brick-and-mortar companies.
SAIF will invest 15-20% of the new fund in public companies, with the rest going to early-stage and late-stage Internet investments as well as companies outside the technology space, managing director Deepak Gaur said in an interview.
The firm will continue to invest prolifically in consumer Internet companies, managing director Mukul Arora added. Among sectors where it has lagged rivals, SAIF will increase investments in education, healthcare, SaaS (software as a service), consumer brands and content, Arora said. Another sector of interest for the new fund is financial services, said managing director Alok Goel.
SAIF first started investing in India in 2002 out of a larger Asia fund. In 2011, it raised its first India-specific fund of $350 million and raised another one of $350 million in early 2015. It will start deploying the latest fund next year, Gaur said.
Unlike its rivals Sequoia Capital, Accel Partners and Nexus Venture Partners, SAIF has chosen against increasing the size of its fund.
In 2015, most venture capital firms raised significantly larger funds taking advantage of investor interest in India. That disappeared quickly as it became clear that investors had overestimated the potential of India’s internet market and underestimated the weakness of the loss-making business models of Internet start-ups. Now, it looks like venture capital investors will struggle to deliver attractive returns on the large funds they raised in 2015 and last year.
Venture capital firms in India started out in 2006 and 2007, but most of them are still struggling to give back capital to their investors or limited partners (LPs). Mint reported last November that most venture capital firms have sought more time to return money to LPs, some of whom have become frustrated with the lack of returns.
Funds are typically structured as 10-year entities, after which venture capital firms have to return the fund to the original investors, which comprise pension funds, endowment funds and other investment institutions in the US, Europe and Asia.
SAIF is an exception, because of its unique investment strategy. It invests in public companies as well as non-Internet companies, two spaces that most of its rivals avoid. Public companies deliver returns far faster than start-ups, which increases the liquidity at the Delhi-based firm (Norwest Venture is the only other venture capital firm that invests in publicly listed stocks).
In the Internet business, SAIF has struck it big with some of its investments, generating attractive returns from firms such as Makemytrip Inc, Just Dial Ltd and Paytm (One97 Communications Ltd). Its other notable start-up investments include Firstcry, BookMyShow, Urban Ladder and Swiggy.
“It took us just a few months to raise the fund. Given our track record and our ability of returning capital, it (the feedback from LPs) was strongly positive. What LPs are positive about is that we are not in that spiral where everyone is wondering what will happen to India. There is a very strong tailwind that the government is bringing. LPs understand that there are near-term challenges but they are bullish on India overall,” Gaur said.
“The consumer Internet market was more tough 12 months ago when the horizontals (e-commerce companies such as Flipkart and Snapdeal) were struggling. At least now people understand that there is a process of consolidation that will play out and there is a threshold till which valuations will fall and not go below that. We’ve reached a steady state and it will get better from here,” he added.
Over the past two years, SAIF has seen changes in management. Two key executives, Mukul Singhal and Rohit Jain, left the firm last year to set up their own fund called Pravega Ventures.
SAIF promoted Arora to managing director this year. In July 2015, it had added Goel, a former senior leader at bus ticket seller Redbus and payments platform Freecharge, as managing director. Goel now leads the firm’s early stage investments as well as its SaaS practice.