Posts Tagged ‘Venture capitalists’

Fund Raising by PE and VCs to Increase by 30-40 percent in 2010

Fund Raising by PE and VCs to Increase by 30-40 percent in 2010


Private equity (PE) players and venture capitalists (VCs) are back in the market to raise funds.


Market experts believe that 2010 will see these players raising $13-15 billion, almost as equal to what PE players and VCs raised in 2008.


PE players and VCs had raised $10-11 billion in 2009, though most of this was in the second half of 2009.


Experts expect to see a 30-40 per cent rise in fund-raising this calendar year courtesy PE players and VCs.


“Close to 45 funds are either preparing to enter the market or have already hit the road to raise funds.

While I feel that matching the level of 2007 is difficult, the year will be better than 2009,”

said Jagannadham Thunuguntla, equity head, SMC Capitals.


Industry experts expect that this year will be governed by returns.

Many Industry experts are of view that LPs are going to focus on returns and returns will be more than 20 per cent, better than in 2009.


“I think LPs are still trying to rework their portfolios.

It will be difficult for general partners to convince LPs to invest,” said Thunuguntla.


Infrastructure, consumer services, education, healthcare, financial and clean technology will be the favoured sectors, say experts.


One sector that is already in focus is infrastructure.

The players are in the process of raising close to Rs 8,541 crore ($1.78billion) worth of infrastructure funds.


Investors will become company-specific rather than sector-specific.

Good sectors can have bad companies and so it makes sense to focus on companies,” said Thunuguntla.


Fund-raising by VCs already seems to be gaining momentum.

Moreover Industry experts are of view that fund-raising will be more selective this year.

It will be better in 2010 than what was seen in 2008-09.


However experts say that the number of funds that get allocation from LPs will come down significantly this year.


In India, PE & VC Funds Turn Selective :)

PE and VC funds in India have tightened their purse strings.

PE and VC funds in India have tightened their purse strings.

Private equity (PE) and venture capital (VC) funds in India have tightened their purse strings.

That’s because limited partners (LPs) —the main source of funding for venture capitalists —are reducing their exposure in this space.

According to industry estimates, there has been a drop in new investments to the tune of 71% during the first nine months of 2009 as compared to the same period last year.


Industry experts say limited partners are miffed with the returns shown by the general partners, who manage the fund and its operations on a daily basis.

Many LPs are looking at better returns and shorter investment term cycles, instead.

LPs have instructed some of their funds to conserve cash and value in the existing portfolio. Some limited partners are not investing in private equity funds on an incremental basis.

This assumes significance in the current context because it’s tough to raise fresh funds, and the competition to attract limited partners to VCs is quite intense.

A venture capital firm is usually structured in the form of a limited liability partnership and people who invest in it are limited partners.

In India, the bulk of venture capital inflow is from Foreign markets like the US and Europe, with limited partners mostly being institutional investors such as pension funds and insurance companies and family offices who are mostly based out of the US.


Indian venture funds are also in place, many of which tap money from overseas by means of an offshore fund.

With new funds not in sight, private equity and venture capital firms are also becoming selective.


VC/PE funds set their sight on Micro Finance companies :)

Venture Capitalists

Venture capitalists/PE (private equity) funds are now looking at investing in micro finance companies in India.


According to observers, around Rs 1,000 crore is expected to be invested by venture capitalists/PE funds in the Indian micro finance space (MFIs) this year.


In fact, of the 50 private equity deals worth $1 billion in banking and finance in the last 18 months, MFIs alone accounted for 20 deals amounting to $200 million.


Apart from MFI focused funds, other venture capitalists and PE funds who consider opportunities in the financial services space are now adding micro finance to their portfolio.

Many venture capitalists are excited about investing in this space now.

Many MFIs especially south-based ones have the right professionals and processes in place. Early stage investors are keen to enter this space.


The venture fund does early stage investment and primarily focuses in healthcare and technology.


Many MFIs have also demonstrated scalability of the business and also boast of a good management structure, essential elements for VC/PE funding.


Venture capitalists have little fancy for Indian start-ups

Venture capitalists have little fancy for Indian start-ups

Dreamy-eyed Indian entrepreneurs, hoping to talk their way into getting venture capital for their start-ups might as well look elsewhere for funding.


It doesn’t happen in India, not often anyway, investors and experts in the industry, maintain.

Venture capitalists in India only prefer growth-stage companies — firms already up and running that need money for expansion.

Most start-up entrepreneurs, as a result, dive into their own pockets or banks, or draw funds from family and friends.

Seed capital for a new business has not come of age in India, they added.

The concept of seed capital does not exist in India, there are a few funds which have come up of late, but it is minuscule compared to the need and potential.

And the problem has also compounded by the current economic scenario, where financial institutions are more concerned with keeping their capital safe than risk their funds with a new venture.

Venture capital firms invested $740 million India in 2008 compared to $876 million in the previous year.

‘The number of deals were also down to 125 in 2008 from 144 in 2007.

Jagannadham Thunuguntla, equity head at SMC Capitals, has an explanation.

‘The confidence among foreign funds, be it venture capital or private equity, hasn’t been restored after what happened back home.’

According to him, these funds will start returning to the equities markets first, and later look at other avenues.

Among start-ups, too, there is intense competition to get venture capital funding.

And more often, there is one set of firms that comes up tops — IT-based businesses or companies that use the web to reach out to customers, said veteran venture capitalists.

A lot of venture capital firms look favourably at IT start-ups because once the concept takes off it is easier for such businesses to scale up.

Also venture capitalists generally have a Silicon Valley background and have a greater understanding of such types of business models.

Past record also matters — a larger number of IT firms have given attractive returns.

‘There is a reasonably long list of IT firms — MindTree, Spectramind, Mphasis, Daksh, — which have delivered good exits for venture capitalists.

Perhaps, that’s the reason why people like Manish Malhotra – who quit his position with a top bank to start a hospitality agency – are still floundering with their business.

‘Venture capital is difficult to get. I come from the banking industry and know people. But even then it hasn’t been easy at all to convince them that my plans will work,’ Malhotra said.

Dreamy-eyed Indian entrepreneurs, hoping to talk their way into getting venture capital for their start-ups might as well look elsewhere for funding.