 "Sandeep Murthy")
As former head of Sherpalo Ventures in India, Sandeep Murthy led Series A investments in inMobi, Cleartrip and GreenDust. Murthy's newly floated venture fund, Lightbox, will acquire six investments made by Sherpalo and Kleiner Perkins Caufield & Byers in India. In an email interview with Ranju Sarkar, he explains his fund's strategy for India
Why did you choose to start a new venture capital (VC) fund?
Technology and data are redefining industries. For example, a market as mature as climate control is being redefined by products such as Nest, and 2015 is expected to be the year of the iCar (look how technology is entering the car space in a major way .. from maps and music to the self driving Google car). Traditional markets are getting upended and new verticals are arising out of seemingly tectonic shifts in the landscape of connectivity.
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A small company in the UK that asks you to move pieces of candy around on a device that didn't exist five years ago is now worth $5 billion. Closer home, one of our prior investments, InMobi, has taken the global, mobile world by storm showing that Indian entrepreneurs and investors who have traditionally made their mark in the Valley have found a way to return home and unlock the same magic that creates global winners.
Meanwhile, another of our earlier investments, Cleartrip, is now scaling new heights as the leading online travel agency in West Asia with a mobile product that shows that great design can come from India. The opportunity to build large-scale global technology companies from India is tremendous.
From a timing standpoint, the last boom in technology was all about mobile - not data, but voice. There were only two industries that were the beneficiaries of the voice boom - access and devices. Both these industries gave birth to multi-billion dollar companies in Bharti and Micromax. The next boom in technology is about mobile data and that will impact all types of industries. We have seen this happen the world over and India will be no different. This will yield many billion-dollar businesses and now is the best time to be building those businesses.
You have started with two funds. How much money have they raised?
Our first fund is the result of the nine years of work. We are continuing to support the portfolio that we have painstakingly built over the past nine years and look forward to seeing mature over the coming years. This fund is called Lightbox Ventures I, which will focus on supporting these entrepreneurs. In parallel, we have launched Lightbox Ventures II - a $90-million technology-focused venture fund. Lightbox Ventures II has had a first close of $25 million and has made its first investment in an online test prep platform called Embibe. Lightbox Ventures II will focus on investing in the same manner that we have over the past nine years that has resulted in great businesses like Greendust, InMobi, Cleartrip and Infoedge. It will be a focused effort on investing in eight early-stage technology businesses where we can work hand-in-hand with entrepreneurs to build industry defining companies.
Who are the investors in these funds, and what are their expectations from you?
The investors in both funds are global institutional investors who are expecting top-tier venture returns.
How difficult was it to raise funds, given the exit scenario in India and the fact that few limited partnership firms have made money in India?
I have been through the process of raising over $325 million for our various portfolio companies and I have learnt that fund-raising is about matching visions, which is a time-consuming process. Our investments over the past nine years have done extremely well on a mark-to-market basis, so we have a solid track record to show. Our strategy of a small, focused portfolio (we will only have eight companies in Fund II) with deep operational engagement has resonated well with investors who see the value in this high-touch approach.
Why did Sherpalo Ventures and Kleiner, Perkins, Caufield & Byers (KPCB) choose to exit India?
KPCB has opted to focus on markets where it has partners on the ground, namely the US. Ram Shriram of Sherpalo remains interested in India and will continue to evaluate opportunities independently and will continue to remain active in his philanthropic efforts in India. The decision to launch Lightbox was a move towards institutionalising a practice I had been running for the past nine years.
What will be your investment philosophy and strategy?
We will continue to invest early (even at the business plan stage) in technology-driven businesses where data and product are a sou-rce of competitive differentiation.
By when do you plan to close the $90-million fund?
We have had our first close of $25 million in March and have made our first investment. We expect to close the full $90 million by August.
Why are you bullish on consumer technology? At what stage do you like to invest and how much?
India is a massive consumption story that is going through rapid concurrent change. Changes in India are happening in parallel, which creates great opportunity for disruption. Growth in consumption, urbanisation and organisation of distribution are further impacted by an increase in technology penetration. These concurrent changes mean that the type of consumer technology driven opportunities in India will look different from those seen in other markets. The general verticals will be similar, but the matter of execution will be very different. For example, in e-commerce, Greendust has managed to take advantage of the fact that no product goes waste and has built India's first profitable e-commerce business by focusing on the reverse supply chain. Greendust focuses on the sale of refurbished products and has managed to create a business that is on a run rate of over $150 million in gross merchandise value.
