Something in common

PRIVATE EQUITY WATCH

Is the demarcation between venture funds (VCs) and private equity (PE) firms getting blurred? It seems so as more VCs are making the PE-type investments. Similarly, PE funds are seen not averse to making early-stage investments in companies "" considered to be the domain of VCs.

At the same time, there are signs of domestic PE funds getting matured with major players such as Warburg Pincus, Carlyle, Temasek, Blackstone, Actis and ChrysCapital taking up only on big-sized deals.

Venture fund Canaan Partners, for instance, has put into $4 million to $20 million which includes seed-financing to late stage investments in Indian companies. Another major player, Helion Venture Partners, said it was a stage independent venture fund, which means it can make the VC- and PE-kind investments.

Said Ashish Gupta, managing director of Helion Ventures: "We make multi-stage investments. When we made our investment in Makemytrip.com (an online travel firm), the company was having $100 million in revenues." Kotak Private Equity, ICICI Venture, Nexus Capital and Sequoia Capital are investing in early to mid-stages. In rare cases, they also go for late-stage investment.

Mukund Ranganathan, senior V-P of Edelweiss, said: "There are different segments in the PE space such as seed investments, venture capital, early stage, growth stage, late stage and buyout stage. So, it depends on what is the mandate of the fund. Most funds invest in different segments as the entry of large number of players are forcing them to look across the spectrum."

Industry observers said seed-funding and buyout funds are rare as most funds are concentrating on funding at the growth stage, skipping high-risk at the seed stage.

Alok Mittal, managing director of the $ 2.5-billion global venture fund Canaan Partners, which has infused money into matrimony website BharatMatrimony, said VCs often stayed away from seed investments. However, he added that the investment in internet, telecom and information technology is more realistic compared with the late 1990s and the early 2000s, which saw several such companies going bust. Currently, the talent available in the IT sector is broader and penetration of the internet and telecom is widespread and the revenues are visible, Mittal further said.

He said IT segments such as product development and mobile technology would attract more VC investments at the growth stage.

Globally, PE funds are also entering new segments such as semi-conductor, healthcare, new drug development and clean energy, Mittal said It is a matter of time when they do the similar act in India.