Exclusive: Tech-focussed US fund CerraCap raising $50m vehicle

Vikas Datt, managing director for Asia Pacific, CerraCap Ventures

California-headquartered global fund CerraCap Ventures, which makes early-stage technology investments, is currently raising a $50 million fund, its managing director for Asia Pacific, Vikas Datt, told DEALSTREETASIA in an interview. The firm targets companies in the enterprise (B2B) space in the emerging technology areas of healthcare, advanced analytics, and cyber security.

CerraCap plans to deploy the new fund over the next 12-18 months. It typically invests in the range of $1-3 million. In India, its portfolio companies include wedding e-commerce platform BandBaajaa.com and healthcare firm Viome.

In a chat with DEALSTREETASIA, Datt also spoke about potential deals, focus areas and the exit scenario in India.

Edited excerpts:

How do you view the investment landscape in India? 

India has a significant demographic advantage and the opportunity is large across every sector. Entrepreneurship, innovation and technology is providing a perfect cocktail for growth. Government has been very supportive through a number of initiatives. We are also seeing significant interest from global institutions, corporates, institutions and HNIs. The ecosystem in India for start-ups is evolving and we need to see more participation from Indian corporate sector to evaluate the M&A opportunities.

How has this year been for you and your portfolio firms?

We have had a very significant year. One of our portfolio companies, Deep Instinct, was selected as the ‘most disruptive AI startup’. Our portfolio companies have raised next rounds from $2 million to $30 million at increased valuations. They have also attracted large investors like Intel Capital, Khosla Ventures, Nvidia and Coatue Management. We have also expanded leadership in our companies at management team and board level, and have launched our portfolio companies in international markets.

Could you explain to us the kind of potential deals that are in the sourcing pipeline? How is 2017 looking like in terms of deal volume and value for CerraCap?

We are focused on deep technology – essentially high-tech business models that solve a fundamental problem. We are seeing a lot of pipeline in cyber security, analytics and healthcare technologies.

Could you give us a sense of the fund structure/dry powder that you are looking to deploy this year and the next financial year? Are you looking at raising a fund?

We are currently raising a $50 million fund and are looking to deploy the same over the next 12-18 months. Our typical ticket size is in the range of $1 million to $3 million.

How do the valuations compare between India and other countries?

As the ecosystem in India is still evolving, we see that companies that see some initial success increase their valuations significantly in a short period of time. However, key questions to ask are if that paper money can be converted to actual money. Is there a buyer at higher levels? Early stage deal sizes are comparable across other countries.

What are the focus areas for CerraCap in India? How is India compared to other markets?

In India we are focusing on analytics and healthcare companies. There is lot of good work happening across these sectors and we see some of these technologies have potential in international markets. We are looking for B2B deep technology startups.

Are exits still a cause for worry for private equity and venture capital players in India? What are your views?

Yes, exit opportunities in India are limited. We need to see increased participation from corporates and institutional funds. We do not have enough investors focused on late stage investments. Global funds are bullish and we are seeing significant action from large funds.

 How is CerraCap different from other VC firms?

Our founding team has had 15-20 years’ experience in IT industry. We are hands-on investors and have a good understanding of enterprise technologies. Our unique model of sales and scale provides early-stage companies with customers access and execution support. We are able to reduce risk through our active participation.

A significant part of your portfolio comprises Indian companies and you have been particularly active in the region in recent years.

India is a very exciting place and is experiencing an era of disruptive innovations. As we evaluate cautiously the deep technologies and the market for investors, we have had activities to engage and partner with industry leaders and technology incubators to expand and grow in this market.

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