Helion Venture Partners is one of the few venture capitalist that successfully closed its second fund of $210 million. With this, the total fund raised by Helion for investing in companies has gone up from $140 million to $350 million. The company has fully invested the first fund. Despite raising its second fund, the company has made no new investment so far. Ashish Gupta, managing director (investment advisor), Helion Ventures, in a chat with Shivani Shinde spoke about the venture capital (VC) environment and some of the investment focus going ahead. Excerpts.
You raised funds right in the middle of the global slowdown. How did you manage to do this?
Yes, the fund raising did happen in a difficult market. But it happened because of the trust we share with out partners and the relationship that we have had.
But you have made no new investment so far?
The first half of this year has been slow. We have been looking at a lot of stuff and have given term sheets to many. It is hard to say that we have slowed down the deals. It is just taking time to close such deals. People are ready to wait and less inclined to raise funds in this environment.
We are looking at the education segment, retail services, financial services, outsourcing, and internet and mobility.
Last year saw a lot of syndicated deals. Helion itself was part of over 6-7 syndicated deals. Will this be the way ahead as well?
The amount of syndication has increased significantly. I don’t think this will change anytime soon.
If you look at 2006 and 2007, people were happy to do deals themselves. One of the reasons was the greed or opportunity available during the boom time. The same greed was replaced by fear in a recession. So after maximising the upside, VCs also acknowledged the fact that they needed to minimise the downside. That is where syndication comes in.
Moreover, the number of firms trying to do second round of financing in early stage is very less. If someone does, they hope that when the company does not reach its milestones, then there is more than one person to shore up the firm.
But then the equity that a VC might get also goes down.
Yes, but then your downside is also limited. This trend was not just prevalent in the second round of funding but also in the first around.
Last year, many VCs moved to late-stage funding. Do you think this is a concern?
Firstly, several of these firms were never in the early stage. Yes, in some cases, there has been migration because of the slowdown and other issues. But a lot of people have realised that companies take longer to build than thought earlier. That has been one reason for the shift.
Besides, in a slowdown, early stage is harder hit because you either raise money or shut shop. In case of a growth stage, your speed of growth gets slowed.
Do you think the VC environment has changed in the last four years and how?
It has changed substantially. For a couple of reasons. In 2004-05, money available for start-ups was not enough. Today it is a completely different world. You did not have Angel Networks, or players such as Accel, Ojus, Helion. But if you ask me that can we have some more players for seed capital in India? Then the answer is yes. But that is always a demand-supply issue.
You have invested in 20 firms so far. What was your message and how did they perform in the slowdown?
The message was to bunker down and focus on growth in terms of performance. Practically, firms with all-India focus have done well. A few focused on the US have run into serious trouble, especially focused on financial services. So is the case of some of the product firms as the buyers have vanished. On the outsourcing side, it has been a mixed bag. While some focused on financial services had troubles, but then there has been no significant drop. Those who were not focused on this sector have all grown. In several cases to the extent of 300 per cent. For instance, UnitedLex, Anantara Solutions.
Would Helion look at late-stage funding and PIPE deals as many VC are also doing it?
We have done late-stage funding, but we prefer unlisted firms. When we took stake in Makemytrip, the company was in the business for seven years, so was in the case of Amba Research or GETIT, which was in existence for 20 years.
But we are not comfortable about PIPE deals. I don’t think we have the expertise. By the way, we have looked at a couple of them, but we didn’t want to do that.
