Investments by venture capital (VC) firms took a beating in 2009. One of the strategy that several VCs adopted during the slowdown was to focus on investee firms. Helion Ventures Partners, a $350-million India-focused, stage-independent venture fund investing in technology-powered and consumer service businesses, was one of them. The fund has invested in 24 companies such as makemytrip.com, UnitedLex, Gridstone, Anantara, Hurix, Amba Research and Mindworks Global Media Service. Kanwaljit Singh, managing director, tells Shilpy Sinha the fund has a special focus on domestic consumption. Excerpts:
What will be the key challenges for VCs in 2010?
We believe availability of funds and interesting new opportunities will not be a constraint for entrepreneurs. The continuing challenge is quality of talent and ability for young businesses to attract next-level resources. We had seen some slowdown in the willingness of mid-level managers to join young companies, but that should ease in 2010.
Good management teams continue to be the biggest challenge for VCs. We are seeing experienced professionals starting companies; we also need to get good management teams to work in these start-ups. Most businesses are execution-heavy, so management talent becomes even more critical.
Do you expect a sharp increase in the number of deals? What would be your strategy?
We do expect deal flow to improve. We have been seeing an increase in deal flow in the second half of 2009, which should continue. We will stay focused on our strategy to look at businesses that leverage technology or are focused on consumer demand in sectors such as education, financial services, retail and services. We don’t have a fixed target for number of investments. We have done between 5-7 investments per year in the past and expect this trend to continue.
Have you increased your focus on portfolio companies?
Helion’s core value proposition is to provide ‘Active Capital’ and we are very closely engaged with our portfolio companies, from the very beginning. Apart from board-level strategic support, we also help with financial and human resources support. We expect to continue this close engagement. Different companies need different support at different points of time and we work with them accordingly.
How do you think 2010 will be for the VC industry? Would you be raising funds this year?
We are optimistic about 2010 and beyond. The overall economic indicators and particularly consumer spending are encouraging signs for business building and new entrepreneurial activities. There have always been lots of white spaces for new entrepreneurs to emerge with interesting business models. We expect entrepreneurial activity to increase with economic growth. While deal flow, particularly for the VC space continued to be good in 2009, the closure numbers were low. We expect 2010 to see more closures, with overall optimism in the Indian economy and signs of turnaround in the global economy. There are no plans to raise funds this year.
Do you think follow-on will remain the focus for the industry? What kind of deals you would be looking at?
We are seeing a good mix of new opportunities and follow-on and plan to invest in both stages. There is also growing interest among VCs to syndicate deals and invest in new opportunities, while follow on and proven business models remain attractive.
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Which sectors are attractive?
After the economic slowdown, domestic consumption has bounced back. We are bullish on consumer services – education, retail services, financial services, etc. In addition, we are seeing opportunities in media and entertainment, healthcare and cleantech, among others, in overall domestic consumption. Domestic consumer demand-focused businesses and technology-powered businesses are the two focus themes for Helion.
What kind of regulatory interventions would you welcome for development of the VC space?
In most domestic sectors, there are regulatory controls. We would welcome more support for foreign direct investment in these spaces like retail, education.