Norwest Venture shifts strategy to growth equity, late-stage VC deals

The VC firm closed its 17th global fund on Thursday, which will also invest a significant amount into India.
The VC firm closed its 17th global fund on Thursday, which will also invest a significant amount into India.

Summary

  • The firm's strategy has particularly shifted in the last two years, where it has made a lot more growth equity bets, especially investing in financial services companies and healthcare-focussed firms.

MUMBAI : Norwest Venture Partners, a global venture capital firm that has invested in startups such as Swiggy and OfBusiness, is increasingly looking at investing in late-stage venture and growth equity deals in India, in a shift from backing early-stage companies when it started investing in the country, a top executive of the company said.

The VC firm closed its 17th global fund, sized at $3 billion, on Thursday, which will also invest a significant amount into India. With the latest fund, Norwest will have over $15.5 billion assets under management.

“Our strategy has moved much more to late stage and growth equity in India," Niren Shah, managing director and head of Norwest India, told Mint in an interview. “When we started investing in India, we were more focussed on early stage venture," he said.

Norwest began investing in India in 2005.

The firm's strategy has particularly shifted in the last two years, where it has made a lot more growth equity bets, especially investing in financial services companies and healthcare- focussed firms. 

In November 2023, Norwest Venture Partners invested 450 crore in Uttar Pradesh-based tertiary hospitals business Regency Healthcare. In recent years, it has also deepened focus on profitable financial services companies with investments in SK Finance, Five Star Business, and Finova Capital.

“What we have recognized is that in India, it's really important to take companies (public through an initial public offering IPO). For IPO, you need sort of companies which have good, strong unit economics, profitability, and so we have focussed a lot more on building growth equity companies and building very strong corporate governance in those companies and to focus on taking them IPO," he added.

Norwest has taken six of its portfolio companies public so far and in 2024, Shah said the firm is expecting at least four of its portfolio companies to file documents and list on the Indian bourses.

Increasing investments 

The firm that has so far backed tech-focussed companies such as Amagi Media Labs, NSE India, Five Star Finance, Infinx, Mensa Brands, Swiggy, Xpressbees Logistics, OfBusiness, Oxyzo, Quikr, SK Finance, Sulekha, Ummeed Housing, Vastu Housing, Veritas Finance, among others, is also increasing its pace of deployment in India.

From investing around $25 million-$30 million a year when the firm started investing in India, it has now accelerated its pace of deployment by almost tenfold annually. “We are now deploying around $250 million - $300 million a year for the last two years," Shah added.

In terms of macros, India is at a sweet spot, believes Shah. “It looks like there's going to be a very strong period of prosperity in India, driven by growth of GDP. Looking at the next decade or so, we'll be at about $10 trillion in GDP. So, I think, given the sort of meritorious nature of how we approach things at Norwest, this (shift) goes very well for India as a market," he added.

In terms of sectors, the firm will look to cut cheques for growth and late-stage companies across sectors such as consumer tech, or tech to the end consumer, financial services, healthcare, offline consumer sector, IT services and manufacturing.

The firm has been consistently returning capital to its investors from the India market. Last year, public market listing of Five Star Finance helped the firm clock manifold returns. It continues to hold a stake in the company. 

“If you look at our exit track record in India, we have a very strong track record," Shah added. “We've exited more than 25 companies. And we have continued to be very exit-focussed." 

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