a venture capital market- the year that went by venture capital market: the year that went by by...
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AVenturecapitalmarket:Theyearthatwentby
BYSnigdhaSenguptaLastModified:Sat,Dec242016.0741PMhttp://www.livemint.com/Opinion/wV4vxSSYXiCCrc5kqdRtlN/Venture-capital-market-the-year-that-went-by.html
Aglanceatsomeofthehighsandlowsthatmarkedthecountry’sventurecapitalmarketinthepast12monthsAdversitybringsoutthebestortheworstinpeople.ThedownturninIndia’sstart-upfundingmarketoverthepast12monthsbroughtouttheworstinthefoundersofsomeofthecountry’smostvaluablestart-ups.Strappedforcapitalandunderassaultfromforeigncompetitorswithdeeppockets,suchfounderscamedowntoplayingthenationalistcardandseekingthegovernment’shelpinkeepingnon-Indianplayersoutofthemarket.ForIndia’sventurecapitalindustry,ontheotherhand,thedownturnhasbeen
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atimetointrospect,salvage,consolidateandrebuild.Welookatsomeofthehighsandlowsthatmarkedthecountry’sventurecapitalmarketinthepast12months.1.Theyearstartedintheshadowofthefirstseriousdownturnthatthismarkethasseeninthedecadesinceventurecapitalre-establisheditsrootshereasanassetclass.Hedgefunds,whichfannedavaluationbubbleinthestart-upfundingmarketfornearlytwoyears,hadfledlatelastyear,leavingbehindayawninggapinthelate-stagefundingmarket.Hedgefundsmayhavedesertedthestart-upmarketbutgloballimitedpartners,institutionalinvestorswhobackventurecapitalfunds,stayedcommitted,infact,uppedtheircommitments.Twoofthecountry’sbiggesteverventurecapitalfundswereraisedinthelast12months.InFebruary,SequoiaCapitalIndia,thecountry’slargestventurecapitalfirm,raisedamassive$920millionfund,dwarfingevensomeofthebigprivateequityfundsraisedherelately.Lastmonth,AccelPartnersIndiaclosedcommitmentsfora$450millionfund,onlythesecondfundofthatsizesincetheoneraisedbyNexusVenturePartnersinDecemberlastyear.Limitedpartnercommitmentshavealsoflowedintosmallerfunds.InMay,Bengaluru-basedSaamaCapitalraiseda$31millionthirdfund.InOctober,Mumbai-basedBlumeVenturesclosed$60millionincommitmentsforitssecondfund.ByLondon-basedresearcherPreqin’sestimates,asofSeptember,India’sventurecapitalindustrywassittingondrypowder,oruninvestedcapital,worthmorethan$3billion.2.Limitedpartners,however,remainconcernedaboutpoorreturnsontheirpastinvestments.Inabidtoalleviatethoseconcerns,fundmanagersatventurecapitalfirmswentintooverdrivetoshoreupexits.Thenumbersfortheclosingquarterof2016areyettocomein.However,intheninemonthsoftheyearendedSeptember,venturecapitalfirmsclosed54exitdealsworth$1.41billion,exceedingthe43exitdealsworth1.39billionclosedinallof2015,accordingtodatacompiledbyChennai-basedresearcherVentureIntelligence.Theexitrunisn’tyetasrobustasbothlimitedpartnersandfundmanagerswouldlike,butahandfulofdealssetthisyearapart.InJuly,onlinetravelservicescompanyYatradeliveredapartialexittoitsinvestors,NorwestVenturePartners,TV18GroupandValiantCapital,whenitstruckareversemergerwithNasdaq-listedspecialpurposeacquisitioncompanyTerrapin3AcquisitionCorp.Thedealinvolvedan$80millioncashpayouttoYatra’sinvestors.YatradebutedonNasdaqthisweekfollowingthecompletionofthemerger.AnothersignificantdealwastheAugustacquisitionofpaymentscompanyCitrusPaymentsSolutionsbySouthAfricaninternetconglomerateNaspersina$130millionall-cashdeal,arareeventinIndia’sventurecapitalmarket.ThedealwasabigpaydayforSequoiaCapitalIndia,whichhadinvestedabout$10million
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overthreefundingroundsforareported32%stake.Theofflineretailsectorservedupasurprisebigexit—inAugust,privateequityfirmTAAssociatesboughtanundisclosedstakeinwomenswearmakerTCNSClothingCo.for$140million.MostofthatwentintobuyingMatrixPartners’undisclosedstakeinthecompany,earningtheventurecapitalfirma5xreturnonitsoriginalinvestment.3.Notallexitswerehappyevents.Asventurecapitalfirmsgottoworkconsolidatingtheirpastinvestments,firesales,write-offsandstock-swapdealswereequallyvisiblethroughtheyear.ThingskickedoffearlywiththemuchspeculatedJanuaryacquisitionofpropertysearchandlistingsplatformCommonfloorbyonlineclassifiedsplatformQuikrinareportedall-stockdeal.ThedealgaveCommonfloor’sbackers,TigerGlobalManagement,AccelPartnersIndiaandGoogleCapital,whocollectivelyinvestedmorethan$60millioninthecompany,stakesinQuikr.InMay,anothertroubledstart-up,TinyOwl,wasusheredintoastock-swapmergerbyitsinvestors.TheonlinefoodorderingservicemergedwithhyperlocaldeliveryserviceRoadrunnr.ThecombinedentitynowoperatesasRunnr,withSequoiaCapital,NexusVenturePartners,MatrixPartnersandBlumeVenturesasinvestors.Thefourventurecapitalfirmshadcollectivelypumpedcloseto$40millionintothetwocompaniespriortothemerger.RocketInternet,theBerlin-basedstart-upincubatorandinvestorwasinvolvedintwodealsthatarewidelybelievedtobedistresssales.InApril,itsolditsonlinefurniturestoreFabFurnishtoKishoreBiyani’sFutureGroupforanundisclosedsumandinJuly,onlinefashionstoreJabongwaspickedupbye-commercecompanyFlipkartforjust$70million,amassiveerosionfromthe$503millionJabongwasvaluedatin2013.TheothernotabledistresssalethisyearwasTitan’sacquisitionofamajoritystakeinjewellerye-tailerCaratlanefor$53millioninMay.ThedealjustaboutenabledCaratlane’sbackerTigerGlobaltocoveritsreportedinvestmentof$52million.Bymostaccounts,theconsolidationandcleaningoutofportfoliosisstillwellunderwayandwillcontinuewellintothenextyear.Theportfoliotowatch,though,willbeNewYork-basedhedgefundTigerGlobal’s60-oddstart-upinvestmentshere,includinge-commercebellwetherFlipkart.4.ThestickyissueofleadershiptransitionintheventurecapitalindustryfounditselfinthespotlightthisyearintheaftermathofabitterspatinDecemberlastyearwithintheinvestmentteamatHelionVenturePartners.HelionisoneofIndia’soldesthome-grownventurecapitalfirmsanditcameapartattheseamswhenitssecondlineofpartners,AlokGoyal,RahulChowdhriandRiteshBanglani,quitthefirminahuff.Theyoungerpartnerswantedmoreofasayinhowthefirmwasrunandagreatershareofprofits.Thefoundingpartners,SanjeevAggarwal,RahulChandraandAshishGupta,didn’tsharethatview.The
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standoffexposedthefragilepowerequationsthatexistinwhatisstillafairlynascentindustry.Theincidentservedasawake-upcalltoseveralotherventurecapitalfirmsthathavebeenaroundaslongasHelionandwillhopefullydetersuchuglyandpublicquarrelsinfuture.5.Sometimes,eventheugliestfightshavegoodoutcomes.Helion’sGoyal,ChowdhriandBanglanihavesincestartedupontheirownwithStellarisVenturePartnersandareinthemiddleofraisingtheirdebutfund.Earlierthisyear,SAIFPartnersprincipalsMukulSinghalandRohitJainbrokeawayfromthefirm,amicably,tostarttheirownseedinvestments-focusedventurecapitalfirmPravegaVentures.Earlier,formerVentureastpartnersSateeshAndraandRameshByrapanenistruckoutontheirowntolaunchEndiyaPartners,focusedonseedandSeriesAinvestments,andraisedinitialcommitmentsfortheirdebutfundinJanuary.Whenseasonedfundmanagersstrikeoutontheirown,especiallyinthemidstofadownturn,itisthesurestsignofaventurecapitalmarketthatismaturing.SnigdhaSenguptaisaconsultingwriterwithMint.Shecontributesstoriesonventurecapitalandprivateequity.