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Home Pos ted: Mon, Sep 26 2011. 1:00 A M IST

Published on

page 7

Deepti Chaudhary,

deepti.c@livemint.com

VC firms to raise nearly $1 bn in 9-18monthsSurge in fund-raising is raising concerns regarding competition, auction-like situations, unrealistic valuation

0

2Start-ups will have about $1 billion (around R4,940

crore) of fresh capital available to them in 9-18

months, with at least half a dozen venture capital

(VC) firms raising new funds.

Aavishkaar India will this month complete raising a part of its fourth and largest fund

yet, with a corpus of $120 million. The early-stage VC firm started raising the fund in

January and is building a pipeline of deals to consider.

With this new fund, the firm will have a total corpus of $200 million in hand, said

chief executive Vineet Rai. “We have been the first-round investors so far. Now we

will also look at investing in the second and third rounds,” he said.

Bangalore-based IDG Ventures India will raise $150-200 million for its second India

fund, which will focus on technology ventures. The early-stage VC firm will launch

the fund early next year.

Of its $150 million first fund, IDG Ventures has invested nearly $115 million in 16

companies. It hasn’t sold its investments in any of these firms yet.

Managing director T.C. Meenakshisundaram said IDG Ventures is not in a hurry for

exits as early-stage funds are assessed on different scales than later-stage funds.

“In the case of an early-stage firms like ours, limited partners (LPs, investors who

back investment firms) look at the health of the investee company. They look for

growth in revenues, value creation since we invested in the company, including the

next round of funding,” he said.

Capital raising is a cyclical exercise and several VC firms are close to exhausting

their earlier funds and need to raise fresh money, but the efforts also boost hope for

start-ups as they come at a time when investment sentiment is low in Europe and the

US, home to most LPs.

Mumbai-based Nexus Venture Partners will raise a $250 million fund, its third, early

next year. The firm has more than $300 million under management.

“Nearly 75% of our second fund has already been deployed,” co-founder Sandeep

Singhal said in an interview in August. On Thursday, when approached over the

phone, he declined to comment on the latest fund-raising.

IndoUS Venture Partners is considering raising its second fund, turning its attention

to early-stage deals from being stage-agnostic earlier, as Mint reported in February.

“We cannot discuss future fund raising,” managing director Kumar Shiralagi said in

an emailed reply.

Ventureast, an investment firm focused on life sciences, technology and emerging

sectors, hopes to complete raising a $200 million fund by the end of this year.

Managing partner Sarath Naru said the firm has started deploying capital from this

fund, but declined to give details on the deals.

Bangalore-based Inventus Capital Partners is also raising its next fund, of $80-100

million, and will continue with its investment thesis of deals in the range of $0.5-2

million.

“We will stick to our strategy of small-ticket investments, more mentoring,” said

Samir Kumar, managing director.

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Tags - Find More Articles On: VC firms fund raising limited partners exits

READ MORE ARTICLES BY: Deepti Chaudhary

Experts say recent exits will boost the efforts of investment firms seeking to raise

funds.

Last week, InMobi, backed by Kleiner Perkins Caufield and Byers and Sherpalo

Ventures Llc, raised $200 million from Japan’s Softbank Corp. in one of the largest

global investments in a mobile ad firm.

“Such exits also have an impact on the fund-raising plans of other fund managers as

exits are the best evaluation for any investment thesis. This also demonstrates how

niche assets will always find buyers irrespective of the sentiment in the market,” said

Vikram Hosangady, head, transaction services,at consulting firm KPMG India.

The surge in fresh fund raising, though, is throwing up concerns as well. With nearly

$20 billion of committed capital remaining un-invested, more liquidity will add to the

competition and lead to auction-like situations and unrealistic valuation, say experts.

“The challenge lies in finding good entrepreneurs,” said Kanishk Agarwal, managing

director, 130R Capital Group, an investment bank in Bangalore.

“The issue is not about getting good ideas. The concern is about finding

entrepreneurs who can execute them.”

Deals India, published jointly by Mint, Dow Jones Newswires and The Wall Street

Journal, is a one-stop destination for investment professionals following deal flow,

deals news, private equity and venture-capital activity in India.

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