A successful entrepreneur and now an investor, Avnish Bajaj, the managing director of Matrix Partners India, has seen both sides of the investment cycle. In 2004, Bajaj and Suvir Sujjan, co-founder of bazee.com, sold the portal to ebay. Since 2006, Matrix Partner India has invested in nine companies through its $300-million India-dedicated fund. Its largest investment was Rs 100 crore in education firm FIITJEE. Bajaj speaks to Shivani Shinde and Shilpy Sinha on the investment environment, the education sector and the firms in the Matrix portfolio. Excerpts:
Matrix has made only nine investment since 2006. Do you think this worked for you during the current slowdown?
It was part foresight and part luck. Until 2007, we had made four-five investments, which is our normal pace. Between mid-2007 and 2008, we let go of many opportunities, primarily due to valuations. To give you an instance, we were looking at a company that we valued at Rs 200-250 crore. The entrepreneur quoted Rs 300-350 crore and so we thought the deal would close at Rs 275 crore. But the deal happened at Rs 800 crore with some other investor. It made no sense.
For a year, we didn’t do things because we did not believe in (such high) valuations. It proved to be a blessing. When the credit crisis happened, though the firms in our portfolio faced difficulty, these were much more manageable.
...but valuations have corrected. Are you close to investing in any firm?
Yes, valuations have corrected but are still high. We continue to be active. We plan to make three-four investments this year. Even if markets correct by 30 per cent, we will invest. We have almost half of the $300-million fund for investment. We invest up to Rs 120 crore per company.
How would you compare the current slowdown to the 2000 dotcom bubble?
As far as India is concerned, this downturn is not as bad as the dotcom bubble. Everything was hyped then and there was very little reality. When the hype blew up, there was no base to fall on and we were growing just 3-4 per cent. But now, we are a trillion-dollar economy growing at 6 per cent. Then, I was an entrepreneur. This time, I am an investor. The liquidity did dry up. Between October and March, getting anybody to write a cheque was impossible. The companies that were dependent on credit in some way or the other faced problems.
How did it affect your portfolio?
It did affect our portfolio. It was more about cash flow. So, consumer services were not affected. Yo! China did not feel any impact, though the working capital dried up. People who owed us money stopped sending us money as they had capital issues. So, the net effect was for six-eight months. But companies like Itz Cash did very well.
Your last two investments were in education. Are there more opportunities in this sector?
Yes, and in healthcare too. In India, the spending power is limited but education, healthcare and financial services are somehow not impacted by that. Again, we were a bit early in spotting the growth opportunity in education. We started looking at the sector in 2007. The first contact with the two companies in which we have invested was as early as 2007.
In 2007, Matrix shifted its focus to later stage and late stage funding. But we have not seen much investment in these spaces?
One thing we would like to take credit for is that when we started the fund, we told our investors that we don’t believe in just tech VC. We believe in early-stage investments but not just tech. We were the first ones to talk about cross-sector or sector-agnostic VC. Then, we saw opportunities in growth or early growth stage. We still do early-stage funding in sectors like internet and mobiles. Early-stage funding requires non-linearity in business for venture returns. Non-linear businesses are difficult to create outside of the technology sector. So, we would rather do growth-stage funds for profitable companies.
