Wipro Ltd’s corporate venture arm Wipro Ventures plans to invest in early-stage venture capital (VC) funds based in the US even as it buys minority stakes in early-to-mid-stage start-ups to help fill gaps in its own range of offerings.
Wipro’s $100 million corporate venture arm, overseen by Rishad Premji, son of chairman Azim Premji, has minority stakes in four US-based start-ups; India’s third-largest software services firm has until now shied away from investing in VC funds.
The company’s change of heart comes a week after Wipro’s rival Infosys Ltd made its first investment in an early-stage focused venture fund, Palo Alto-based Vertex Ventures.
“This is inevitable,” said an executive familiar with the matter. “As we try to broaden our reach in the start-up ecosystem, it’s impossible for any one individual or team to evaluate the most promising start-ups. So it’s only logical that we also look to invest/partner with some early-stage venture capital funds,” added this person, who asked not to be named as he is not authorized to speak with the media.
The executive declined to disclose details, including whether Wipro Ventures is in talks with any VC funds, saying: “As part of our mandate we constantly evaluate and engage with VCs. We could soon invest in a US-based VC fund unless of course there is a compelling proposition to partner with some other country-focused VC.”
A spokesman for Wipro confirmed the development. “In addition to our direct investment activities, it is part of our charter to invest in early-stage funds that focus on specific technology areas or geographies.”
Some experts say this is a logical move for the corporate venture arms of technology firms.
“There are many ways to approach this. Having your own ventures team is important but adding a mix gives you the opportunity to try different approaches and gives you broader exposure to new investment hypothesis,” said Ray Wang, founder of Constellation Research, a technology research and advisory firm.
Until now, Wipro has focused only on start-ups in the US though its management has said in the past that its investments will not be limited to one country. Since May 2013—even before Wipro formally set up a corporate venture arm late last year—Wipro has made five investments in start-ups. It sold its stake in one, US-based machine-learning start-up Axeda, to a Nasdaq-listed firm PTC Inc.
Wipro has spent $30 million to buy a stake in Opera Solutions, a New-Jersey based data analytics company, and invested $5 million in Drivestream Inc., a Virginia, US-based cloud solutions start-up.
During the April-June period this year, Wipro also made undisclosed investments in San Francisco-based artificial intelligence start-up Vicarious and California-based early-stage big data start-up Talena Inc.
Both Infosys and Wipro know the significance of start-ups in reviving the fortunes of legacy software firms.
Over the past few years, the traditional approach followed by the large companies in India’s $146 billion outsourcing industry has come under pressure. This is primarily because information technology (IT) maintenance work is becoming commoditized, as new technology offerings such as automating a lot of tasks and cloud computing offer a cheaper and more efficient alternative to the historical model of using an army of engineers to oversee technology work.
To retain their dominance in the outsourcing space, IT vendors are picking stakes in small start-ups focused on disruptive technologies, including artificial intelligence and cloud computing, which they can then take to their clients.
Infosys has set up the Infosys Innovation Fund, with capital of $500 million, to back start-ups and has so far spent $18.4 million in picking up stakes in three start-ups, It is managed by CEO Vishal Sikka’s former SAP AG colleague Yusuf Bashir.
Bashir does not have any prior VC expertise, and at SAP AG, he helped then chief technology officer Sikka develop and launch new products. Bashir works along with a team of eight executives—none of them have worked in venture funds in the past—based out of US, Israel and Bengaluru. Infosys has also reserved half of its $500 million fund to back start-ups in India.
Wipro Ventures’ $100 million fund is jointly managed by Venu Pemmaraju, formerly a senior investment manager at Intel Capital, and Wipro executive Biplab Adhya. Both Pemmaraju and Adhya are based out of California, report to Rishad Premji, and work with Wipro’s chief technology officer K.R. Sanjiv, who is based in Bengaluru.