These also help these big companies understand India better.
Here is some good news for start-ups in India. SAP Ventures, the investment arm of the information technology (IT) major, may be looking at launching an India-dedicated fund. It is expected to take a final decision by next year. SAP Ventures, which has been investing in Indian companies, draws from its balance sheet. This highlights the growing interest among corporate venture capitalists (VCs) to invest in the Indian entrepreneurial story.
Jai Das, partner, SAP Ventures, told Business Standard, “We are not planning to set up a team in India at this moment, but will reconsider again next year. We are actively looking at investing in Indian start-ups. The start-up ecosystem here is still nascent. However, there are product-oriented companies coming up in fields like mobile phones and consumer internet.”
SAP Ventures has invested in three Indian companies — iYogi, Newgen Software and Connectiva Systems. “We don’t have specific allocation for any geography but try to invest in the best start-ups across the globe,” said Das. The company, which has invested in around 75 countries, sees a huge potential in India.
SAP Ventures is not the first one to do so. Intel Capital, the VC arm of Intel, the chip manufacturing giant, has also sharpened its focus on India.
Similarly, Cisco and Microsoft have started looking at Indian start-ups to foster innovation. Cisco and Intel, which have set up India investment teams, have used more than 50 per cent of their corpus of $200 million and $250 million, respectively.
“Intel Capital sees a huge opportunity for growth in India. The country is seeing more product companies and the ecosystem is slowly taking shape. We are committed to fostering innovation among Indian entrepreneurs,” said Pradeep Tagare, director, Intel Capital. It is one of the earliest corporate VCs to invest in India.
The company, which made its first India investment in 1998, has invested in 70 companies across the country. In 2010, it invested in eight companies, including Althea Systems, July Systems, MCX, Verismo, Allied Digital Systems and more recently, Omnesys Technologies.
Cisco Investments and the M&A group are also investing in India’s growing markets in areas like video communication and collaboration, new media and digital entertainment, cloud computing and managed services.
| THE FUND FLOW TOP INVESTMENTS BY TECH VCS IN 2010 | |||
| Company | Investors | Amount ($mn) | Month |
| NetMagic | Cisco, Nokia Growth Partners , Fidelity, Nexus Ventures | 16 | October |
| Tessolve Services | JAFCO Asia, Qualcomm Ventures, Reliance Venture, Applied Ventures | 11 | April |
| Allied Digital | Intel Capital | 7 | September |
| July Systems | Sequoia Capital India, Intel Capital, Footprint Ventures | 7 | March |
| Source: Venture Intelligence | |||
Investing in start-ups also gives these VCs a better understanding of the market for aligning their products. Cisco started investing in 2005. It has three focus areas while investing: Companies providing broadband applications, multimedia and video services and those that align with Cisco’s future technology road map.
“We have a strong interest in India and see our investments here as an important way of understanding the local market, aligning technology innovation and enabling a larger ecosystem,” said Joydeep Bose, managing director, corporate business development investments and acquisitions, Cisco.
Same is the case with Intel Cap. With the launch of 3G spectrum and BWA auctions, the VC is planning to target three screens — mobile, computer (internet) and television. Varsha Tagare, director, Intel Cap, had told Business Standard in an earlier interview: “With BWA auctions, there will be an opportunity to offer services on all three screens — mobile, computer and TV. We have invested in some companies which have a presence in the internet space. From an investment point of view, there will be focus on investing in firms that can cater to these three screens.”
Though the year 2010 saw the economy still emerging from recession, it witnessed significant deals.
According to data from Venture Intelligence, a research service focused on private equity & M&As, there were nine deals worth $87 million in 2010, as against 11 deals worth $168 million during the previous year. Many of these VCs chose to invest in portfolio firms rather than in new companies.
Partnering corporate VCs has advantages for start-ups too.
These VCs are driven by the overall technology roadmap the parent company follows. On the other hand, entrepreneurs who chose to be with corporate VCs tend to get a headstart as these firms can take them directly to the marketplace.
Global companies feel that through investments and a supporting ecosystem, start-ups can take their innovations to the global market more easily using their global networks. Also, it helps them make profit through partnerships.
