Sudheer Kuppam has moved on from Intel Capital, chipmaker Intel Corp.’s corporate venture capital arm, to start his own venture, Epsilon Venture Partners. The firm’s debut fund will raise $400 million to invest in technology start-ups across Asia, including India. Singapore-based Kuppam takes the entrepreneurial plunge after 15 years of being at the helm of Intel Capital’s investments in India and the Asia-Pacific region.
Closer home, Sajjan Jindal, promoter of the $11 billion steel-to-infrastructure JSW Group, is reportedly starting a $15 million venture capital fund called JSW Venture Fund. It will be overseen by Jindal’s son Parth Jindal and will target technology and Internet start-ups.
The two funds represent two distinct developments that have the potential to change the complexion of venture capital in India.
Kuppam is the latest venture capitalist from this part of the world to step down from an established firm and strike out on his own. Over the past few years, several of his peers have gone down a similar path.
Last April, Sandeep Murthy launched Lightbox Ventures in Mumbai with a $90 million debut fund. Murthy used to manage Silicon Valley firms Sherpalo Ventures’ and Kleiner Perkins’ India investments. About four years ago, the SVB India Capital Partners team, fronted by former SVB Global head Ash Lilani, decided to go independent. They launched Saama Capital in Bengaluru. Around the same time, Anand Lunia quit Seedfund to go solo. He founded India Quotient in Mumbai in June 2012.
All three firms now play a pivotal role in driving early-stage investments in the Indian start-up market. Their current portfolios include start-ups such as mobile payments platform Paytm, quick services restaurant chain Faaso’s, reverse logistics services provider Greendust, property search platform Grabhouse, fashion discovery platform Roposo, and e-commerce marketplace Snapdeal.
Importantly, they’ve all raised successive funds, underlining the confidence that limited partners (institutions and individuals that invest in venture capital funds) have in independent teams.
India’s venture capital market has so far largely been dominated by Silicon Valley firms, who operate here through their local arms. Such firms still constitute more than 90% of the industry. That is changing gradually as seasoned fund managers such as Kuppam, Lunia, Lilani and Murthy take the plunge to launch independent, home-grown firms.
In the longer term, as the dependence on Silicon Valley firms comes down, which it must, the growing presence of independent, home-grown shops will help create a more stable and sustainable venture capital market here.
Independent firms, though, are still largely dependent on foreign capital. And will be for some time. That’s because India doesn’t yet have a large enough base of home-grown limited partners. While several of the new independent firms have raised capital from domestic investors, these are primarily high net-worth individuals (HNIs) who have relatively small ticket sizes. Large corporate entities, insurance companies and other financial institutions here don’t meaningfully participate, if at all, in venture capital.
The proposed JSW Venture Fund has to be seen in that context. The $15 million allocation (reports suggest the Jindal family office will invest and not JSW) sounds like a pittance, but it’s a start. The fund is a rare instance of a so-called old economy corporate group seeking to re-invest its capital in businesses of the future. Until now, all the large corporate groups that have set aside funds for start-ups hail chiefly from the information technology sector.
Groups similar to JSW, for instance, the Aditya Birla Group and the Tata Group, have largely stayed away from start-ups, preferring instead to set up later stage, private equity funds that bet on brick-and-mortar companies. That could change soon.
More importantly, these groups and family offices could play a far more pivotal role in changing the complexion of the venture capital market if they were to become limited partners to the growing population of independent, home-grown venture capital shops.
Of course, for the twain to meet, we first have to ensure that the prevailing start-up wave doesn’t turn into a bubble.
This article was first published on livemint.com