India Venture Capital and Private Equity Report 2018
2018
Success and Impact of Start-ups
Fuel For Start-Ups
2018
Perspectives on the Indian Venture Capital Industry
India Venture Capital and Private Equity Report 2017
2017
THE STATE & THE START-UP: An analysis of government policies and support for Start-ups
Private Equity Impact 2017
2017
Private Equity Impact
India Venture Capital and Private Equity Report 2016
2016
Inspiration and Momentum for the Gladiators: A Study and Analysis of the Start-ups
India Venture Capital and Private Equity Report 2015
2015
The Alchemy of Judgment and Objectivity: An analysis of valuation and structuring of venture capital and private equity investments
India Venture Capital and Private Equity Report 2014
2014
The Fuel for Wealth Creation: An analysis of capital providers to private equity firms
India Venture Capital and Private Equity Report 2013
2013
Convergence of patience, purpose, and profit: An analysis of impact investments in India
India Venture Capital and Private Equity Report 2012
2012
Stimulus for the New and the Nascent : Incubation support and angel funding for start-ups
India Venture Capital and Private Equity Report 2011
2011
Fueling Growth and Economic Development: An analysis of Private Equity investments in Real Estate and Infrastructure
India Venture Capital and Private Equity Report 2010
2010
The Contours of Smart Capital : An analysis of Venture Capital and Private Equity Investors in India during 2004 - 09
India Venture Capital and Private Equity Report 2009
2009
On top of the World
Entrepreneurship: Beyond self-employment to innovation
Change can be accompanied by great social upheavals such as the ones seen in the French revolution. Or, it can be as gentle as the arrival of Spring...

Read More...
Public sector financial institutions: Keeping venture capital firms in funds
In the glamorous world of venture creation, the role of public sector financial institutions (PSFIs) has often been understated. But like the glue that binds...

Read More...
Venturing where angels fear to tread
Romanticisation of venture creation overlooks many practical difficulties faced by the entrepreneur. Getting funding, for instance. The image that has been...

Read More...
Seizing the high tide moment
Strike while the iron is hot. Nothing can be truer for an entrepreneur. In an era, where opportunities come fleeting, seizing the moment when it presents is critical...

Read More...
VC impact: The picture beyond the pixels
My professional pursuits give me numerous opportunities to interact with venture investors. Invariably, most of these discussions steer towards the returns...

Read More...
The odds against entrepreneurial fund raising
Entrepreneurs looking to raise capital would do well to bear in mind the teaching of Sun Tzu: 'If you know the enemy and know yourself...

Read More...
Angel investors and their stripes
In the piece I had written in these columns on December 13, 2016, I had highlighted the terrific growth in angel investing in recent years. In 2015 alone...

Read More...
Why start-ups need the kid glove treatment
In the cut-throat world of business and commerce, where return on investment and bottomline rule the roost, love and affection...

Read More...
The start-up show: Let’s applaud the play
The turn of the decade has been truly remarkable for start-ups and ventures. While Wordsworth might have been overjoyed seeing ten thousand daffodils at a glance...

Read More...
Tasting success in fund raising
Usain Bolt. 2016 Olympics 100 metres Gold Medallist, among several other wins. One of the most globally recognised athletes today. Heard of Trayvon Bromell?...

Read More...
Trends in StartUp Ecosystem and Financing
The impact of startups has been significant in all walks of life. In recent years, India has emerged as one of the top three countries globally...

Read More...
Inside the minds of venture investors
A man is known by the company he keeps. It is an old saying, and pardon me, the gender is only incidental. Today a company, particularly, is known by the investor it has...

Read More...
VC investment: Adapt, not avoid, complexity
KISS, the popular acronym for Keep it Simple Stupid, is an elegant concept, but it has its limitations. While complexity is not needed when simplicity can do the job,...

Read More...
There is a method to the valuation madness
Every once in a while, a phenomenon occurs that ignites popular imagination and creates paradigm shifts. In the start-up world, Unicorns are one...

Read More...
Right pitching key to fund-raising
Fifteen years ago, I was a greenhorn in the VC industry, relatively speaking. In a meeting with a prospective entrepreneur, I was extolling the virtues of the fund...

Read More...
The how and why of early-stage investments
I received an email from a former student a couple of weeks ago requesting for a meeting. He had founded a start-up and wanted...

Read More...
Ventures get a bigger bang from the domestic buck
The buzz is in the air. Youth of all ages in India is keener than ever to pursue an entrepreneurial career. However, the entrepreneurial journey...

Read More...
Throwing good money after bad
At the outset, the case seems fairly straightforward. The crying baby needs to be fed. We are talking about the small and medium enterprise (SME) sector...

Read More...
The role of ventures in strengthening the fabric of the city.
A city can support ventures… and should, because ventures return the favor in ways you might not expect. This article shows how the presence of venture can energize the hosting city, leading to a virtuous symbiotic equilibrium. It uses as a case study the South Indian city of Chennai, founded in 1639, which is one of the thriving metropolitan cities of India today.<br> After introducing us to Chennai and to the role of large ('Tier 1') cities in the world of venture in India, the authors proceed to show the impact of ventures in two domains: reinforcing the economic fabric of the city, and reinforcing its social fabric. Chennai is a center of four economic sectors: Healthcare, Automobiles, Movie and Music, and Information Technology. Ventures are playing a key role in sustaining the leadership position of the city in these sectors. They have augmented existing capacity, pushed forward the industry frontiers, introduced new processes to bring about greater efficiency, and facilitated a change in mindset by breaking new ground. Meanwhile they also play a role in the social sector through their ability to achieve depth impact, offer niche services that public agencies themselves are unable to provide, and design technology driven solutions to enhance the delivery of civic services. The article provides numerous examples from diverse domains, all demonstrating this symbiosis between the city and its ventures. If you thought that the only effect of ventures was in the jobs and profits they created, read this article and think again!

Read More...
Chennai, 1998-2015: From the epicentre of small business to venture.
The City of Chennai, with an area of 426 km2, is the capital of the South Indian State of Tamil Nadu. The city is the fourth largest city in India and the 31st-largest metropolitan city in the world. The economy of the city is the third-largest in India, with a GDP of US$66 billion and a per capita GDP of US$1,870. Tamil Nadu is traditionally known as a forward looking and industrialized state with a socially conscious population. It has the largest number of SMEs in India and the government has set up various agencies to facilitate SME growth.

Read More...
Financial Value Creation: A Comparative Study of VC-Backed IPOs and Non-VC-Backed IPOs in India.
As financial investors in portfolio companies, venture capital (VC) firms are expected to add value through continuous monitoring and sustained involvement. Such an effort is expected to give VC-backed IPO firms (VC IPOs) an edge over those IPO firms not backed by VCs. We examine such value additions use a comparative analysis of operating and stock performance data of VC IPOs against three groups of non-VC POs. We identified a set of 92 VC IPOs and 182 non VC IPOs. The 182 non-VC IPOs were further subdivided into industry and size groups. While Wilcoxon tests were used to compare the medians of operating and stock performance, panel data regression models were used to establish the impact of VC on those differential performances. We find that the medians of VC IPOs on most operating performance parameters are better than non-VC IPO groups. But the relational tests could not attribute the better performance to VC influence. We conclude that this could be indicative of VCs’ superior ability to identify promising ventures and push them toward their maximum potential. This study is one of the pioneering efforts in exploring VC value creation in the Indian context. We also extend the capital market research in accounting to a VC context.

Read More...
A Lifecycle Analysis of VC-PE Investments in India: Half Full or Half Empty?
This article is concerned with the main government policies in equity financing and capital market funding to support entrepreneurial development in Asia. In particular, the author undertakes a comparative case study analysis of four Asian countries: Thailand, Malaysia, Singapore, and Taiwan. The study finds that the government intervention model is successful in Singapore and Taiwan. Although Singapore and Taiwan have clearly defined agencies responsible for carrying out policy implementation, Malaysia and Thailand suffer from having redundant organizations/agencies competing on offering similar innovation financing schemes. The study offers effective innovation financing policy recommendations to support the national economic and social development. The proposed policies can be integrated into national strategies to strengthen the innovation system of the Asian countries.

Read More...
The Tigers and Their Stripes: Types of VC Firms and Their Investment Patterns in India.
The venture capital and private equity industry in India has grown significantly in recent years. Using data from 2004–2008, a life cycle analysis provides findings that can impact the long-term growth of the industry. A large proportion of the deals are Round 1 investments, with a dramatic drop in subsequent rounds. Most investments are in late-stage financing and take place many years after the incorporation of the investee firm. The industry is also characterized by the short duration of the investments. To ensure long-term growth of the industry in India, investments should be made in early stage financing, investors should stay invested for a longer duration, and larger rounds of funding should be made in the portfolio companies.

Read More...
Venture Capital and Private Equity in India: An Analysis of investments and exits.
The venture capital and private equity (VCPE) industry in India has grown significantly in recent years. During five‐year period 2004‐2008, the industry growth rate in India was the fastest globally and it rose to occupy the number three slot worldwide in terms of quantum of investments. However, academic research on the Indian VCPE industry has been limited. This paper seeks to fill the gap in research on the recent trends in the Indian VCPE industry. Studies on the VCPE transactions have traditionally focused on one of the components of the investment lifecycle, i.e. investments, monitoring, or exit. This study is based on analyzing the investment life cycle in its entirety, from the time of investment by the VCPE fund till the time of exit. The analysis was based on a total of 1,912 VCPE transactions involving 1,503 firms during the years 2004‐2008.<br> Most VCPE investments were in late stage financing and took place many years after the incorporation of the investee firm. The industry was also characterized by the short duration of the investments. The type of exit was well predicted by the type of industry, financing stage, region of investment, and type of VCPE fund. This paper highlights some of the key areas to ensure sustainable growth of the industry. Early stage funding opportunities should be increased to ensure that there is a strong pipeline of investment opportunities for late stage investors. VCPE investments should be seen as long‐term investments and not as 'quick flips'. To achieve this, it is important to have a strong domestic VCPE industry which can stay invested in the portfolio company for a longer term.

Read More...
New and Nascent Enterprises: Analysis of Incubation Support in India.
Incubation centers have emerged as an important source of finance and support for new and nascent companies. In line with the worldwide trend, there has been a substantial increase in the number of incubation centers in India during the past 10 years. Using data from 159 incubators and a sample of 1,058 incubatees from 40 incubators, this article provides an analysis of the trends in incubation support in India. Universities play an important role in providing incubation support—67% of the incubators were based in universities. Not only are there more incubators functioning in universities, but they have also been functioning for longer. In addition, 57% of the incubators were in private organizations, and 43% were in public sector organizations.<br> There are interesting variations between incubation support and venture capital and private equity (VCPE) investment in India. Most of the VCPE investments in India are seen in metro cities, whereas in the incubation, most of the incubation centers and incubatees are located in non-metro cities. VCPE investments are largely driven by the private sector, whereas the public sector plays an important role in incubation support and financing. Private sector incubators are more effective than public sector incubators, as measured by the activity indicator and graduation ratio.

Read More...
Venture capital and efficiency of portfolio companies.
Venture Capital (VC) has emerged as the dominant source of finance for entrepreneurial and early stage businesses, and the Indian VC industry in particular has clocked the fastest growth rate globally. Academic literature reveals that VC funded companies show superior performance to non VC funded companies. However, given that venture capitalists (VCs) select and fund only the best companies, how much credit can they take for the performance of the companies they fund? Do the inherent characteristics of the firm result in superior performance or do VCs contribute to the performance of the portfolio company after they have entered the firm? A panel that comprised VCs, an entrepreneur and an academic debated these and other research questions on the inter-relationships between VC funding and portfolio firm performance. Most empirical literature indicates that the value addition effect dominates the selection effect in accounting for the superior performance of VC funded companies. The panel discussion indicates that the context as well as the experience of the General Partners in the VC firms can influence the way VCs contribute to the efficiency of their portfolio companies.

Read More...
Beyond Capital: Private Equity and Real Estate Development in India.
The real estate sector in India has attracted substantial investment from Private Equity (PE) investors since 2006. This study is based on an analysis of 290 PE deals in real estate and investment of $15 billion during 2004 – 10. During the period 2006 – 10, real estate sector accounted for 34% of the total PE investments in India. The characteristics of projects that have obtained PE investment indicate that these are very large projects. 80% of the PE investment in real estate has been from foreign PE firms. Most of the investments have been made at the project or SPV level, to facilitate better monitoring post investment. The diligence and active monitoring that is normally associated with PE investments have brought in the much needed transparency and better corporate governance standards to this sector. Tier 2 cities accounted for as much investment as that of Tier 1 cities. However, the average investment size in Tier 2 cities was much higher than that of Tier 1 cities. By taking top class real estate development beyond the boundaries of Tier 1 cities, the PE firms have in a way contributed to the development of some of the smaller cities.

Read More...
The Global Epicenter of Impact Investing: An Analysis of Social Venture Investments in India.
Venture funding for social enterprises has seen significant growth in the first decade of the 21st century. Using the traditional approaches of venture investing in social enterprises to create positive social impact while simultaneously achieving financial returns has been intuitively appealing. India has emerged as one of the largest marketplaces for social venture investing. This article provides a perspective of social venture investments in India based on an analysis of 523 deals in 212 companies. The results indicated that venture funding for social enterprises had several distinctive characteristics such as smaller investment sizes, early stage investing, and longer investment duration. Financial inclusion has been the main investment thesis, as evidenced by the large number of investments in microfinance companies. Most investments were in companies that facilitated consumption at the base of the pyramid segment, rather than in companies that created income and employment opportunities. Creation of dedicated social venture funds would benefit the sector, as such funds made more investments as compared to mainstream venture funds. Evidence from the microfinance industry showed that the scale of the investee company was one of the important criteria for investment. Performance parameters of microfinance companies that had venture investment did not significantly vary from those that were not venture funded, indicating the need for more active contributions and value addition from the investors.

Read More...
Roundtable on Value Creation from Venture Capital and Private Equity Investments: The Indian Context.
This article is based on a roundtable discussion of how venture capital and private equity investments create value for their portfolio companies. Value creation happens in all three stages of investment process—identification, investment, and monitoring. In the Indian context, high levels of investor involvement in the investee companies play a significant role in value creation. In some instances, venture investors give credibility to not just the investee company but to the sector as whole. Venture investors have de-risked IPO investments by reducing both immature business models and fly-by-night operators. Over the years, interesting investment models such as “Entrepreneur in Residence,” shareholding in exchange for incubation, and mentoring services have evolved.

Read More...
Private Equity Investment in Infrastructure: Evidence from India.
There has been rapid growth in private equity (PE) investment in infrastructure over the last decade. This article is an analysis of PE funding in infrastructure based on data from Indian projects. Data from 335 infrastructure projects with PE investment and 370 projects with no PE investment have been used in the analysis. The average investment in projects made by foreign PE investors was higher than that of domestic PE investors. The average investment made by a mix of domestic and foreign investors was significantly higher than the average investment sizes of a group of either the domestic or foreign investors, suggesting that the presence of domestic investors increased the comfort level for foreign investors to enter the market. The main motivation for syndication was to pool capital from different investors. The overall characteristics of the operating environment also play an important role in attracting PE investment. States that had higher values of PPP and Property Right Indices and lower corruption levels attracted PE investment in more projects. Comparing the state level characteristics of projects with and without PE investment showed that PE investors are prepared to invest in riskier environments than other investors.

Read More...
A Choice between Staging and Syndication as Tools to Control Risks When Private Equity Invests in Infrastructure.
To mitigate the risks faced by private investors, including private equity (PE), strategies such as staging and syndication have been successfully employed. In this article, the determinants and preference of these two alliance-based strategies are explored when PE invests in infrastructure. Known for large capital outlays, project-finance structures, and nonrecourse financing, infrastructure is not a conventional choice for PE but has received enormous PE investment in recent years. Worldwide deals from 1990–2009 in energy, transport, and water and utilities sectors are analyzed in a nonrecursive path model to examine how environment, information, and investment risk determines the probability and preference of these strategies. Results indicate that the experience level of PE, especially in infrastructure, prior infrastructure experience, and proximity to the project determine the choice between staging and syndication, with staging emerging as the preferred alternative.

Read More...
What Do PE Investors Seek From Syndication Partners? Evidence from the Infrastructure Sector.
This article presents an analysis of Private Equity (PE) syndication in infrastructure projects. Previous studies on syndication have been largely in developed countries, with few studies synthesizing the findings of research to support decisions at a sector level. The sample for this study was 358 worldwide deals with PE investments in energy, transport, and water and utilities sectors. First, we identify differences between infrastructure deals that have PE syndication with those that do not. Second, we analyze the drivers of PE syndication. Third, we understand the extent of PE syndication. Our findings indicated that PE syndication was driven by the need for local knowledge—which was critical due to the site-specific nature of infrastructure assets, translating into syndication with local partners. As round number increased, diversity of experience took precedence over level of experience, indicating that PE firms syndicated with other PE firms to achieve a varied set of skills.

Read More...
Private Equity investment in power generation projects – Evidence from India.
Private equity (PE) has emerged as an important source of capital for infrastructure in recent years. There have been more than 2,000 deals by PE infrastructure funds till 2012, with annual investments in the range of $100-120bn. Substantial proportion of these investments has been in the energy and the power sector. This paper aims to compare power generation projects with and without PE investment. In this study, 148 power generation projects that were implemented in India during 2004-2011 were used for the analysis. Ordinary least squares and three-stage least squares regression have been used to analyze the impact of PE investment on unit project costs and project commissioning time.<br> Projects with PE investment had lower unit capacity costs as compared to power projects that did not have PE investment. This indicated the ability of PE investors to select, invest and develop those projects that are cost-effective. However, projects with PE investment had longer commissioning time. This can be attributed to the active monitoring and governance practices that were associated with PE investment. The results highlight the key role that PE investors can play in power sector development in developing countries. Apart from providing capital to capital-starved economies, PE investors can help in developing cost-effective projects and contribute to sector development by institutionalizing robust processes and governance practices.

Read More...
Impact of private equity investments in infrastructure projects.
Private financing of infrastructure projects is commonly seen in many countries today. In recent years, many private infrastructure projects have also attracted investment from Private Equity (PE) firms. Though there have been instances of PE investment in infrastructure even in the past, the growth has been substantial in recent years. This paper analyses the role of PE investments in infrastructure financing. The findings are based on an analysis of 2821 infrastructure projects that were announced during 1990–2009. It was found that projects with PE investment were larger when compared to projects that did not have PE investment, indicating that that PE investment helped in successfully financing larger projects. Our analysis also indicated that PE investment in infrastructure is more frequently seen in developed countries as compared to developing countries. In developing countries, the number of sponsors is higher in projects with PE investment without any corresponding increase in project size. This indicates that PE investors have helped in sharing the project risk among a larger group of investors, thereby reducing the risk faced by the individual sponsors.

Read More...
A new perspective on private equity stage financing: evidence from investments in infrastructure.
This paper examines the staging of investments when private equity (PE) invests in the infrastructure sector. This sector is characterized by large upfront investment requirements and non-recourse deal structures. Over the last two decades, it has witnessed increasing PE investment activity. PE firms have the option to finance infrastructure project by infusing capital at once, or by staging infusions through multiple investments. In case the PE firm decides to disburse the capital in multiple investments, it creates the staging function, a mechanism successfully used in the past to combat risk and uncertainty. This study hypothesizes that the decision to stage investment is a response to the factors that influence infrastructure deals including institutional and financial environments, project structure, and reputation of the PE firm. This paper examines 358 worldwide infrastructure deals from 1990 to 2009 with PE investments of US$9.74 billion to analyze the choice for, the motives behind, the duration between, and the determinants of staging. We find that developing/transition economies and markets characterized by high inflation and interest rates increases PE propensity to stage. Further deals with larger investment sizes and younger investee companies pose increased risks, and PE firms seem to use their prior infrastructure experience and bargaining power to stage financing. Our results also confirm that long-term relationships between the PE firm and the investee company are advantageous to both parties. We believe that the positive results acquired through the PE staging strategy will help perpetuate it as one of the best tools available for PE investing in the infrastructure sector.

Read More...
Private Equity investment and real estate development: Evidence from residential projects in India.
The purpose of this paper is to understand the trends and contribution of private equity (PE) investors in real estate development in India because the real estate sector in India had witnessed significant investments from PE firms in recent years. The study focused on residential segment of real estate development, as it is the largest among all the segments. Two types of analyses have been done in this paper: first was to compare residential projects with PE investment with those that did not have any PE investment. The results were based on an analysis of 453 residential projects. The second was an analysis of only those projects that had PE investment. This paper studied if there were differences in investment patterns between domestic and foreign PE investors, and dedicated and diversified PE investors.<br> Projects with PE investment were larger, as compared to projects that did not have any PE investment. The results of this paper also showed that PE firms preferred to invest with developers who had significant experience in undertaking larger-sized projects. PE investments significantly happened in projects that were located in metro cities. While PE firms as a whole preferred to invest in project mode, domestic investors were more inclined to invest in a project structure as compared to foreign PE firms. Though foreign PE firms invested more amounts per deal on average, there was a negative relationship between foreign PE firms and the extent of their shareholding in the investment. Encouraging PE investment in real estate projects would contribute toward to increasing the transparency in the sector.

Read More...
Venture Capital Exit: In Pursuit of Optimal Strategy.
The study of venture capital exit has started gaining momentum since the last decade. Though valuation and pricing still remain the important areas in decisions relating to exit, other factors like the selection of appropriate timing, optimal exit route, etc. too are being studied extensively. This report summarizes the studies relating to the exit route and exit timing of venture capitalists and provides an optimal exit strategy. Though this report does not explicitly consider the factors influencing the exit design involving exit route and exit timing, these factors have been mentioned while explaining the other major objectives. Of the studies related to decisions regarding the optimal exit route, identification and grouping of five basic routes have been reviewed and summarized. Additionally, certain variants relating to the exit routes, like the partial exits, foreign IPOs, use of convertible securities, etc., have also been covered usefully. Finally, a review of the studies relating to the exit timing decisions has been made. Studies related to this commonly acknowledge the fact that IPO can be used for early exit and trade sales, buybacks, secondary sales and write-off, in the descending order. Based on the studies related to exit type and timing, appropriate exit strategies have been evolved with different combinations of type and timing. This is expected to give some beneficial guidelines to the executives of venture capital firms as well as to entrepreneurs.

Read More...