After raising funds and setting up teams in the last 18 months, venture capitalists (VCs) are now ready for some serious action. Investments will accelerate in 2008 and teams will be expanded to accommodate the increase in deal flow. Firms such as Matrix Partners India, Norwest Venture Partners and Canaan Partners will add investment partners while ePlanet Ventures, Helion Venture Partners and NEA IndoUS Ventures plan to hire associates at different levels.
The year 2007 saw VC investments scale $900 million (Rs3,546 crore), according to industry reports. VCs invested more than $777 million in 57 deals in the first nine months of 2007, according to Dow Jones VentureOne and Ernst and Young. This is about five times the $158 million invested in the same period in 2006. Silicon Valley’s best, such as Norwest Venture Partners and Draper Fisher Jurvetson set up offices here. Bessemer Venture Partners earmarked a third of its $1 billion global fund for India.
New sectors, old sectors
Education and energy top the list of emerging sectors VCs are keen to invest in. Online learning services have started attracting investments—in the last three months, three companies— Hurix Systems Pvt. Ltd, TutorVista.com and 24×7 Learning Solutions Pvt. Ltd—together landed funding of close to $12 million. Firms are also scouting for clean tech companies to bet on. VCs continue to remain bullish on the consumer Internet and wireless space. Some, however, are cautious about investing in mobile services companies, while the operator continues to keep the lion’s share of the revenues.
Moving into growth
As fund sizes get larger, firms will invest larger amounts in companies in 2008. Matrix Partners India, for example, expanded its corpus from $150 million to $450 million so it can invest in growth as well as early stage companies.Lightspeed Venture Partners, which does not have a dedicated India corpus, will do more growth deals as well. ePlanet Ventures, in the process of raising a $500 million global fund, will increase deal sizes after April. Canaan Partners, Norwest Venture Partners and NEA IndoUS Ventures will also invest in some growth companies.
Concerns
“Valuations, valuations, valuations!” says Avnish Bajaj, MD, Matrix Partners India, when asked about concerns for 2008. It is a sentiment echoed by most VCs, who fear overheating of the market, especially for growth companies. While valuations in early stage companies are not as affected by the stock market as later stage private equity deals, the effect may trickle down, say VCs.
Source: Livemint