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Billionaire Mukesh Ambani is scouting for start-ups that could dovetail with his own plans for e-commerce and phone services in India. For that, he is willing to look as far as Israel and Silicon Valley in the US.
GenNext Ventures, owned by his Reliance Industries Ltd, is talking to other venture capital firms and private equity investors in those countries and in the UK to pick out candidates, Managing Partner Vivek Rai Gupta said in an interview. The selected start-ups could use Reliance's network to gain access to a market that is now the biggest for Facebook Inc after the US.
"It can be a two-way street," said Gupta, who used to head the India operations of consulting firm A T Kearney until 2008."It gives them an opportunity to come to a big market like India and for us, it is an opportunity to interface with the best new ideas from that country."
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Start-ups are the latest in Ambani's plan as he readies his $13.6 billion (Rs 8,499 crore) high-speed fourth-generation phone network across India, where Morgan Stanley predicts e-commerce sales will surge tenfold by 2020. GenNext, backed by the refining-to-retail conglomerate, is an "evergreen fund that will invest opportunistically," Gupta said.
"Big corporates can benefit from mentoring and supporting" start-ups, said Kalpana Jain, Deloitte India's New Delhi-based senior director, adding they could take advantage of "synergies."
The Mumbai-based venture capital firm has mentored 11 local fledgling businesses at its accelerator GenNext Innovation Hub, a joint program by Reliance and Microsoft Ventures. It hasn't yet invested in any of these.
While GenNext provides the office infrastructure and brings in industry experts to guide the start-ups, Microsoft brings in the rigour of running such a programme, said Kattayil Rajinish Menon, Bengaluru-based director for start-ups at Microsoft Corp India, which also runs a separate accelerator in the city formerly known as Bangalore.
"We are following the seed-to-fruit approach," said Raghunath A Mashelkar, GenNext's chairman and Reliance's board member. "We will hand-hold them all the way." The first batch of start-ups includes LogiNext Solutions, which helps track rail cargoes, trucks and couriers boys, and spot delivery bottlenecks. Coitor IT Tech offers a virtual changing room where customers can try on clothes on a computer screen. Others include a predictive health care analytics company called Health Vectors, connected car platform CarIQ and a passenger safety platform AxleRate.
GenNext is already inviting applications for its second batch starting in June. There would be greater focus on helping firms secure investments next time, Menon said.
Private equity and venture capital funding in Indian internet firms rose almost sixfold in 2014 from a year earlier, according to a February 2 Morgan Stanley report. Investors have poured in $4.5 billion (Rs 28,049 crore) since January 2014 in this sector, it said, with e-commerce firms cornering 70 per cent of the infusions, followed by classifieds, travel and taxicab services.
Payments and logistics companies will likely receive more funding in 2015, the brokerage report said.
Large investors "serve as beacons for others," said Arvind Mathur, president of the Indian Private Equity & Venture Capital Association.
GenNext has so far invested in two local companies, Kolkata-based Videonetics Technology Pvt and Mumbai-based Covacsis Technologies Pvt, and is open to investing in more including those it mentors at its accelerator, said Gupta who didn't disclose the size of the fund.
Reliance Industries had cash and equivalents of $10.6 billion (Rs 66,370 crore) as of March 30, according to data compiled by Bloomberg.
Reliance Industries explores oil and natural gas and operates the world's biggest refining complex in Gujarat. Its wholly owned subsidiary, Reliance Retail, owns supermarkets and lifestyle stores and is planning an e-commerce platform.
The conglomerate bought Network 18 Media & Investments Ltd in May last year, a purchase that would provide news and entertainment content for Reliance Jio. Reliance has already invested at least $12 billion (Rs 74,792 crore) in Reliance Jio, its planned 4G service. In the airwave auctions this month, Reliance Jio spent an additional Rs 10,080 crore on acquiring spectrum.
GenNext will consider buying a small stake in one of the start-ups whenever there is a business alignment with Reliance, according to Mashelkar. "There is a wide diversity in businesses within Reliance, so we will look out for start-ups that can be a natural fit within that ecosystem," he said.
Filtering for GenNext's second batch of start-ups will be tighter, with emphasis on businesses that look into information technology, retail, broadband services, homeland security and energy management, said Gupta.
Some of the biggest investments in India in the last two years have been in online retailing, with Flipkart, India's largest online retailer by sales, raising $2.3 billion in multiple rounds of funding from investors such as Chase Coleman's Tiger Global Management LLC, Russian billionaire Yuri Milner and Singapore's GIC Pte.
Competitor Snapdeal.com secured investment of $627 million from SoftBank Corp in October.
"There can be a 100 Snapdeals and Flipkarts in India," said Gupta. "The digital ecosystem is blooming and GenNext wants to be right at the centre of it."
