WestBridge eyes start-ups with $200 m fund

Indian venture capital group WestBridge Capital Partners has raised $200 million for its second fund, to be invested largely in companies tapping into the domestic consumer market.

WestBridge Ventures II, India's largest fund solely aimed atstart-up companies, represents a departure from the group's first $140 million fund, which was focused on outsourcing companies.

"Outsourcing made a lot of sense five years ago, but now we're increasingly seeing great opportunities in India's domestic market," said Sumir Chadha, co-founder and senior managing director of WestBridge Capital Partners.

"A lot of what's happened with the outsourcing boom created a lot of spending power in the country."

WestBridge will follow the same approach for its second fund, investing in start-ups with up to $10 million in revenues and about 95 per cent of their employees in India.

The new fund will seek out consumer-oriented companies in sectors such as healthcare, internet, wireless services and retail.

"The whole retail sector is going through a sea change," Chadha said. "In the past two years, there's been a dramatic rise in upper middle-class spending power."

He said India's mobile phone market, in particular, presented opportunities for software companies in video games or messaging, while the domestic retail sector was ripe for speciality concepts such as croissant-selling bakeries or a national chain of drug stores or gyms. "We're seeing just the tip of the iceberg," he said.

Chadha, who previously worked in venture capital at Goldman Sachs, set up the first fund in 2000 with another Goldman banker, KP Balaraj, to invest in young Indian companies that were involved in the growing offshoring trend.

The first fund is fully invested in 17 companies, most of them in the outsourcing sector.