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Pivots, pique and pumpkin latte

A few takeaways from reporting on venture capital in India

Nexus Venture Partners has become the first homegrown venture capital firm to breach the $1 billion mark in terms of funds under management. The Mumbai-based firm, which also works out of Bengaluru and Menlo Park, California, has just announced the successful close of its fourth fund at $450 million. That takes its total funds under management to a little more than $1 billion.

The milestone couldn’t have been better timed. It comes on the eve of India’s venture capitalists completing an uninterrupted decade of investing in this market. Nexus, like several others, is a 2006 vintage venture capital firm that started out with a modest $100 million debut fund. The new fund, also the second largest India-dedicated venture capital fund ever raised, is a nice way to close out a decade that has seen the rebirth of the Indian venture capital industry.

At Mint, we are just wrapping up a multi-part series that traces the decade through the journeys of select firms that have been around from the beginning. Along the way, we have discovered their ups and downs, their quirks and, in some rare cases, even their unpleasant side.

A few takeaways from reporting for the series that didn’t make it to print:

Pivots aren’t just for start-ups: A big reason we are able to talk about 10 years of venture capital in India today is the industry’s ability to reinvent itself. Most venture capital firms out there didn’t look the way they do now when they started out. Barring a couple of exceptions, most fund managers mixed up early-stage deals with later stage, and pursued non-technology businesses with as much enthusiasm, sometimes more, than technology businesses. Over the past couple of years, nearly every firm has pivoted its investment strategy to focus on early-stage, technology investments. How well the pivots are working, we will know in another couple of years.

Founder squabbles: It isn’t only founders of start-up companies that squabble and fall out with each other. The same holds true for venture capital firms. We have had two notable cases this year, both somewhat acrimonious. At one firm, one of the founders, at the insistence of the remaining founders, found himself out the door earlier than planned. The firm squarely blamed its recent misfortunes on this particular founder, though that is debatable. In the second firm, when one of the founders decided to step down of his own volition, the remaining founders actually requested that his contributions not be recorded in any future stories on the firm. Yes, founder squabbles at venture capital firms can get ugly too.

Tiger tales: Just about every venture capitalist in the country has crossed paths with New York hedge fund Tiger Global Management. Yet, nobody will talk about the firm on record. Off record, though, it’s a picnic. And, lately, the stories have been all about Tiger’s reluctance to pump in money as indiscriminately as it has done in the past. “A lot of founders (of Tiger-backed companies) just happen to be in the neighbourhood these days, wanting to catch up," says one venture capitalist in Mumbai. Another, also in Mumbai, is a little more serious. “Look at who’s winning in e-commerce and you will know why Tiger is worried about India," he says. Yet another, in Bengaluru, is relieved. “At least, we don’t have to rush into deals," he says. Whichever way you look at it, Tiger remains top of mind with fund managers across the country.

Networking hang-ups: Venture capitalists, they say, are born networkers. That may be true for the tribe in Silicon Valley, but India’s venture capitalists still have a lot of catching up to do. There are now many more venture capitalists getting out there for some face-time with entrepreneurs at coffee shops. One former entrepreneur, who now leads investments for a Silicon Valley firm, has even trekked down to a spa in Mumbai to take a funding pitch. But, by and large, venture capitalists in India generally prefer a somewhat controlled environment when it comes to meeting entrepreneurs. It could be a curated event preferably at their own offices. Or may be on the sidelines of a large conference. Of course, one has to appreciate that the demand and supply dynamics in India are very different from Silicon Valley and some reserve is in order. Still, it wouldn’t hurt to get out there more often and network with entrepreneurs in less formal environments. If anything, it’s good for the soul.

Finally, the biggest takeaway from going back 10 years to track venture capital’s evolution has been how we still don’t have access to reliable data. There is more data available from multiple sources and each one differs in its estimates. We don’t really know how much exactly venture capitalists, i.e. early-stage investors, have invested in India in the past 10 years. Maybe, the completion of a decade is a good time for venture capitalists themselves to think about evolving a more credible method for tracking industry data.

Snigdha Sengupta is a freelance journalist in Mumbai and founder of StartupCentral. She contributes stories on private equity and venture capital to Mint.

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