July 01, 2015

Private Equity investments vault 80% to over $4-B in Q2’15

Mega deals across sectors drive average deal size up 79% QoQ; 6 Month Investment Value Up 53% YoY 

Private Equity firms invested about $4,046 million across 128 deals during the quarter ended June 2015, according to early data from Venture Intelligence . The investment amount was 80% higher than that invested in the same period last year ($2,242 million across 115 transactions) and 43% higher than the immediate previous quarter (which had witnessed $2,825 million being invested across 160 transactions). The latest figures take the total PE investments for 2015 to $6,871 M across 288 transactions (53% more than the $4,480 million across 252 transactions in the first six months of 2014). Note: All figures in this note are exclusive of PE investments in Real Estate.

There were as many as 11 PE investments worth $100 million or more (with seven over $200-M) during Q2’15 compared to four such transactions in the same period last year and seven during the immediate previous quarter, the Venture Intelligence analysis showed. The largest investment reported during Q2’15 was Baring Asia’s $440 million buyout of Blackstone-backed ATM cash management services firm CMS Infosystems, followed by Olacabs’ $400 million (INR 2,520 Cr) fund raise from a group of existing and new investors (including GIC, DST Global, Falcon Edge Capital and Accel USA). An over 20% stake in listed consumer lender Shriram City Union Finance changed hands from one PE investor to another (TPG Capital to Apax Partners) for $383 million (INR 2,456 Cr). The Advent International led $315 million (INR 2,000 Cr) buyout of a 34.4% stake in Crompton Greaves Consumer Electricals from its promoter Avantha Group was the next largest transaction during Q2’15.

Other companies that attracted over $200 million rounds during Q2 2015 included Sun Pharma (where Temasek stepped in to acquire the stake of Japan’s Daiichi for INR 1,875 Cr), Snapdeal (INR 1,563 Cr from investors in mobile recharge and couponing firm Freecharge - that Snapdeal acquired - including Sequoia Capital India, Valiant Capital, Ru-Net Holdings, Tybourne Capital and others) and Mankind Pharma (where Capital International acquired ChrysCapital’s 11% stake for INR 1,300 Cr).

IT & ITES companies grabbed 44% of the investment by value (attracting $1,772 million across 84 deals) during Q2’15, followed by Healthcare & Lifesciences companies ($737 million across 10 transactions) and Energy companies ($309 million across seven transactions).

Late Stage companies (including mature companies like Mankind, thermal power firm OTPC India and TVS Logistics as well as Internet companies like Snapdeal and Quikr that have graduated to raising their seventh or later rounds) accounted for 24% of the investment pie in terms of value. Led by the Shriram City Union and Sun Pharma transactions, listed company investments (“PIPE” deals) accounted for 23% of the pie in value terms (while just 5% in volume terms). Led by the CMS and Crompton Greaves deals, Buyouts accounted for as much as 20% of the pie in terms of value (though constituting just 2% of the deal volume) in Q2’15, the Venture Intelligence data showed.

The Venture Capital segment (defined as investments of up to $20 million in companies that have been active for less than 10 years) accounted for 89 transactions or 70% of volume pie (11% by value) during Q2’15. The larger VC type investments in Q2’15 went into follow-on rounds in companies like local shopping app firm Zopper (reported $20 million round led by Tiger Global), handicrafts e-tailer Craftsvilla ($18 million led by Sequoia Capital India) and online food ordering Swiggy ($16.5 million round led by Norwest). Trendsetting investor Tiger Global made four new Early Stage bets in Q2’15: expense tracking app MoneyView, home services app LocalOye, online tutoring firm Vedantu and tea retail chain Chaayos.

Venture Intelligence is the leading provider of data and analysis on Private Company Financials, Transactions (private equity, venture capital and M&A) & their Valuations in India. Click Here to Sign Up for the FREE Weekly Edition of the Deal Digest: India's First & Most Exhaustive Transactions Newsletter.

June 15, 2015

PE/VC Deals Unavailable in Public Domain

As part of the Venture Intelligence Newsletters. we rigorously cover transactions disclosed by companies, PE/VC investors and advisory firms. However, we don't stop there. As part of the Venture Intelligence PE/VC Deals Database subscribers can find transactions that are as yet unavailable in public domain. Some sample transactions of this variety:

Sequoia invests in mobile wallet firm

Kalaari invests in E-Commerce Analytics firm 

Matrix, Blume back Hiring Data Analytics software firm

If you already subscribe to the Venture Intelligence PE/VC Deals Database, just login and click on the respective deal links above. If you don't subscribe yet, please Contact Us for a demo.

Venture Intelligence is the leading provider of data and analysis on Private Company Financials, Transactions (private equity, venture capital and M&A) & their Valuations in India. Click Here to Sign Up for the FREE Weekly Edition of the Deal Digest: India's First & Most Exhaustive Transactions Newsletter.

June 08, 2015

IIT-ians and the Disruptive Power of Errand Apps

From elephants and snake charmers to software coders/coolies to app-toting delivery boys/dabba-walahs, the image of what's "happening" in India keeps morphing. And IIT-ians get added to the mix somewhere.

"India is becoming the land of the errand app." declared a recent Bloomberg News article that got featured in various international publications. Extracts:
“People today want to do as much as possible with their phones,” said TinyOwl co-founder (Harsh Vardhan) Mandad, who graduated from Mumbai’s Indian Institute of Technology in 2012. “It is a friction just to go out – there’s the heavy traffic, pollution and waiting involved for a cab.”
The startups are carving out niches by serving certain neighborhoods or parts of cities, realizing the “hyper-local” strategy long envisioned in more developed countries including the U.S. Larger e-commerce companies such as Flipkart and Snapdeal dominate online sales of more traditional goods, including books, apparel and electronic goods.
Sure enough, there has been a rush of Venture Capital into the local services segment - especially the mobile enabled variety - over the last 12 months. According to the Venture Intelligence Private Equity / Venture Capital Deals database, about $200 million has gotten deployed (across 25 transactions) in the segment. Including various flavors of food ordering services - led by TinyOwl - that have raised almost $50 million (across 12 transactions). 

Cab & Courier Country

The hyper local / errand apps phenomenon has got the attention of media executive-turned-Private Equity investor Haresh Chawla. In his essay for Founding Fuel titled "Making money off the lazy economy," Chawla asks readers to "Imagine a day when all you will see on the roads are smartly-uniformed courier boys and smart-cabs. A country of cabs and courier boys!". More from Chawla's analysis:
This serve-the-lazy-Indian economy will impact our entire society--from the people who work at minimum wages, to professionals who sell their skills; from the smallest kirana store to the large corporates. It will unleash an irreversible shift in consumer behaviour and how we transact with service providers and merchants. It has the power to create new vectors of growth for our economy, as we overcome the limitations of infrastructure and under-utilized capacity with the friction-reducing power of technology.
The on-demand economy has already changed the lives of smart-cab drivers, as some of them take home more than Rs 80-90,000 a month. New marketplaces are forming which will change the size and shape of several sectors, and will direct a transfer of wealth from the well-heeled lazy ones to the hardworking willing-to-serve workers. It will give birth to millions of jobs in the process and cause a structural shift in our labour market. We shall herald the rise of the smart-worker--all they will need is a smartphone and a willingness to do a good job. 
New Wave of Disruption

Interestingly, the mushrooming of mobile enabled local services start-ups seems to be disrupting their poster child peer from the Internet-era: "local search" firm Just Dial. NextBigWhat has a chart showing how various startups are "unbundling Justdial" and crediting them to the 34% fall in Just Dial's stock value (over six months).

Indeed, less than two years after a very successful public listing, Justdial has announced a buyback of its stock. And Tiger Global, which had invested over INR 100 crores in Justdial prior to its IPO, has completely sold off its stake (with an over 13 times return) and is now among the most aggressive investors in the mobile-enabled disruptors.

Speed Bumps Ahead?

Chawla warns that it might not be all smooth sailing for the lazy economy start-ups.
No one is charging the real cost of these services. So, one should check whether there is enough room in those business models in India. A plumber in India costs Rs 200 a job versus $200 in the US and may not have the same service ethic as his counterpart in the US (who is probably professionally qualified as well). The margin you may earn on his services may not be enough to sustain the cost of the team of IITians!
Will the disruption caused by the venture capital-backed startups fizzle out when the funding tap shuts (as it did in 2000-01)?

How will that impact the Uber earnings of today's smart cabbies?

And (of course) where will IIT-ians, who are currently hungry to launch "serve-the-lazy" apps, turn to then?

Questions typical of interesting times.

Venture Intelligence is the leading provider of data and analysis on Private Company Financials, Transactions (private equity, venture capital and M&A) & their Valuations in India. Click Here to Sign Up for the FREE Weekly Edition of the Deal Digest: India's First & Most Exhaustive Transactions Newsletter.

June 04, 2015

Have You Noticed: The Boom in CRO Deals

Trends from the Transactions Universe

There have been at least eight M&A transactions involving pure play Contract Research Organization firms between January 2014 and May 2015 - versus just five deals in the entire three year period prior to 2014.

Of these transactions, four have been domestic deals and three Inbound. The only Outbound transaction was GVK Biosciences' acquisition of US-based Aragen Bioscience which specializes in high-value biologics services. The Sequoia Capital India-backed GVK Bio was also a buyer domestically - acquiring Chennai-based Vanta Bioscience which offers toxicology evaluation services for the pharmaceutical, biotech, food supplements and feed additives industries. (GVK also excercised its call option to buy out Dai-Ichi Karkaria's entire stake in their joint venture Inogent which offers a mix of services  - Process R&D and Custom Chemical Synthesis & Manufacturing - and Products - APIs and Intermediates.)

While GVK has been a buyer, recent months have witnessed two large, NCR-headquartered business groups - Max India and Fortis Hospitals - sell off their CRO arms. While Max Neeman Medical International was acquired by Canada-based JSS Medical Research Inc., Fortis Clinical Research Ltd was sold to Chennai-based Quest Life Sciences.

Among Inbound deals from the US, Parexel International Corp acquired the assets of Chandigarh-based Quantum Solutions India (QSI), while Par Pharmaceuticals acquired Chennai-based Ethics Biolabs. An intra-Hyderabad deal witnesssed Indovation Technologies buying out Sristek Clinical Research Solutions, while venture-backed Karmic Lifesciences was sold to Ahmedabad-based Cliantha Research.

Is the sector set to witness even more consolidation? Keep track of transactions in CRO and other sectors via the Venture Intelligence Deal Digest Newsletters and M&A Deals Database.

Venture Intelligence is the leading provider of data and analysis on Private Company Financials, Transactions (private equity, venture capital and M&A) & their Valuations in India. Click Here to Sign Up for the FREE Weekly Edition of the Deal Digest: India's First & Most Exhaustive Transactions Newsletter.

May 27, 2015

What does Lee Fixel of Tiger Global know about India that local VCs don't?

Lee Fixel, Partner & Head of Venture Capital

Riding on its early and aggressive bets in the E-Commerce segment, New York-based Tiger Global Management currently enjoys a “lion’s share” of the mindshare in the Indian Venture Capital ecosystem. At the Venture Intelligence APEX’15 PE/VC Summit in March, one VC speaker candidly admitted: If there is one foreign investor who knows the Indian Internet & Mobile landscape better than us locals, it’s him” (meaning Lee Fixel, the head of Tiger’s VC operations). A mid-market Private Equity investor wistfully remarked: “While we will never be good at it as the Tigers of the world, we really need to figure out this E-Commerce thing - if we are to produce supernormal returns for our investors”.

Sharad Sharma, Angel Investor & Co-Founder iSPIRIT writes in the Economic Times: "Unfortunately, due to just one individual - Lee Fixel of Tiger Global - Flipkart has gone from being a poster child to being the single biggest risk to the technology ecosystem." 

Given how it has - almost single handedly - re-ignited excitement in the Indian Venture Capital segment, Tiger is clearly the investor everyone wants to follow. Here therefore is some essential reading on what Tiger has been up to in the country between April 2007 and April 2015:

What is Tiger Global’s most successful investment in India?

Flipkart is clearly Tiger’s biggest bet in India. Despite being an early investor in the company, Tiger has continued to participate in the mega rounds Flipkart raised in 2014-15 at ballooning valuations. From an exit standpoint however, local search firm Justdial stands out. In what was its first investment in India, Tiger had invested INR 74 crore in April 2007 in the then privately held Justdial (and followed it up with an additional INR 27 crore in July 2009). In four tranches - between Dec-14 and May-15 - Tiger completed exited Justdial realizing INR 1,331 crore or over 13 times its investment (of INR 101 crore).

Wow! Was Tiger the first PE/VC investor in Justdial?
Nope. SAIF Partners had picked up a 19.5% stake for about INR 55 Cr in Oct-06 (and had co-invested smaller amounts - with Tiger and Sequoia Capital India - in later rounds).

Have Tiger and SAIF partnered in other successful deals?
In Sep-07, Tiger Global joined SAIF and other existing investors in online travel firm MakeMyTrip. (SAIF had originally invested in the company in 2005.) MakeMyTrip went public on the Nasdaq in 2010, resulting in strong returns (read: upwards of 10x) for its investors and triggering, what many consider, the Second Internet Gold Rush in India.
In May 2015, Tiger invested in “tea cafe” chain Chaayos and electric bikes maker Ather Energy. Has Tiger made other investments in sectors outside of Internet & Mobile? Historically, yes: National Stock Exchange (in Oct-09), power producer Asian Genco (Aug-07); test preparation company T.I.M.E (Jan-08) and vocational education company IIJT (Aug-08) What’s the status of Tiger’s older non-tech investments? Tiger sold its stake in IIJT to HR Services firm Teamlease in 2010 - at a significant loss. The rest of the companies are un-exited. Oops. But isn’t NSE a good bet? In Oct 2013, Private Equity investors in the exchange - including Tiger - were reported to have sent a note to the NSE management - via a law firm - demanding the exchange go public and/or issue more dividends. The “request”, according to another report, however had not seemed to have found much purchase

Which Indian VC firms has Tiger partnered with the most and the least?
In the taxi segment, Tiger and Accel chose to part ways - in 2012, Tiger went with Ola, while Accel backed TaxiForSure (TFS) - only to see the companies come together in 2015 (as Ola acquired TFS)!

Kalaari Capital (the first VC investor in Flipkart rival Snapdeal.com) and IDG Ventures India, which had partnered with Tiger at Myntra in  2011, and Inventus Capital (which had invested in Policybazaar in Apr-13) stand out among active VC firms with least portfolio companies in common with Tiger.

Does Tiger depend on other VC funds for its deal flow?

Mostly Tiger has been a co-investor or a follow-on investor. The rare exceptions include e-jeweler Caratlane.com (starting in Feb-11), Ola’s first round (in Apr-12)  and online gaming firm Rummycircle (where Tiger had partnered an individual investor in Apr-11).

How did the Tiger investment in Caratlane.com happen?

Speaking at a conference, Caratlane.com founder Mithun Sacheti said the investor had reached out to him over LinkedIn! Between Feb-11 and Jan-15, the company has raised four rounds of capital - all from Tiger.  And not for want of trying (to get other investors interested). According to Sacheti, the maturity and understanding that Tiger has - from having seen online businesses evolve in other parts of the world - is lacking in purely India-based investors.

Does Lee Fixel actually joins the board of Tiger’s Indian portfolio companies?

Yes. He personally sits on the boards of the following half-a-dozen companies: Ola, Caratlane.com, Commonfloor, Hike, Culturealley and Relevant E-Solutions.

Is there anyone from Tiger on the ground in India?

Managing Director Kalyan Krishnamurthy, formerly based out of Singapore, is reported to have recently shifted to Bangalore to oversee Tiger’s growing India portfolio. He sits on the boards of Caratlane.com and Grofers. A former eBay Asia executive, Kalyan had also served as an interim CFO at Flipkart (on deputation from Tiger) in 2013-14.

How much has Tiger actually invested in India?
Tiger has invested an estimated $1.3 Billion in India-based companies over the last eight years. The number of companies it has invested in has crossed 40 - with a dozen new companies being added in the first five months of 2015.

Where is all this India data about Tiger Global coming from?
From the Venture Intelligence PE/VC Deal database - India’s longest serving and most reliable source of data on PE/VC transactions. Including the really really juicy stuff like valuations and return multiples.  If you already subscribe, just login, click on the “Directory” tab and search for “Tiger”. Or just click this direct link.

Not a subscriber yet? Ask for a free demo & trial now!
Where can I get more free background about Tiger? Naughty you! Head over to the Venture Intelligence Blog Post “Worried about Tiger Cubs & other Hedge Funds in Indian StartUp territory? Now, start thinking about the Grand Cubs.” But make sure to head to the Venture Intelligence PE/VC database for the real stuff - like what kind of valuations is Tiger offering companies for the Series A deals it’s doing in 2015, etc.

Venture Intelligence is the leading provider of data and analysis on Private Company Financials, Transactions (private equity, venture capital and M&A) & their Valuations in India. Click Here to Sign Up for the FREE Weekly Edition of the Deal Digest: India's First & Most Exhaustive Transactions Newsletter.

April 29, 2015

Declaration of Independents: A New Venture Funding Model Without the Exit Pressure

Indie.vc is a new experiment (in the US) that provides equity like capital to founders in return for cash distributions from profits instead of needing to sell out or taking their company public.

The philosophy:
There’s a mythology that entrepreneurs need to take VC money to hit the big time. While it’s true that some companies really do need outside capital, there are many examples of great companies that have reached revenues of hundreds of millions of dollars, or even gone public, without ever taking in capital, or taking it in only at a late stage, when they’d already created a high valuation by bootstrapping the company.
...Like cement, the cultural foundation for new projects and companies sets early. Those who focus on raising outside capital and achieving fundable milestones have a very difficult time getting off that VC treadmill. Those who focus on creating value for customers and generating positive cash flow from the very beginning are able to make their own decisions independent of competing outside interests.
Can companies today who plan to stay independent and bootstrap their business be competitive in a world awash with Silicon Valley startups and Sand Hill Road cash? Can we build a new kind of startup community that values independence and a DIY work ethic?
The Methodology:
Traditionally, technology investors only get their money out when you sell out (another term for this is a “Liquidity Event”). An investment from IdVC doesn’t preclude you from selling, but in the event you stay independent, our investment will get paid out as distributions from cashflow over time.  
...Initially, we will get 80% of those distributions while the founders take 20% until our initial investment has been returned 2x. At 2x the model flips to 80% to founders, 20% to inde.vc until we’ve received 5x our investment. Distributions to indie.vc are capped at 5x. 
Only if and when you choose to raise more money from traditional investors or sell out do we become shareholders in your company.
More detailed summary of the terms are spelt out here. A model for how the cash distribution will work is here.

More about the "Declaration of Independents" by Bryce Robeters here.

Arun Natarajan is the Founder & CEO of Venture Intelligence, the leading provider of data and analysis on private company transactions, valuations and financials in India. Click Here to learn about Venture Intelligence products that help entrepreneurs Reach Out to Investors, Research Competition, Learn from Experienced Entrepreneurs and Interact with Peers. Includes the Free Deal Digest Weekly Newsletter: India's First & Most Exhaustive Transactions Newsletter.
Venture Intelligence is the leading provider of data and analysis on Private Company Financials, Transactions (private equity, venture capital and M&A) & their Valuations in India. Click Here to Sign Up for the FREE Weekly Edition of the Deal Digest: India's First & Most Exhaustive Transactions Newsletter.

April 24, 2015

From Unicorn to Oxymoron - Tech Startup Frenzy Spurs New Lexicon. "Private IPO" being the Latest.

Q: What do you call a $100 million plus investment by Hedge Funds, Mutual Funds and other typically  public market investors, in Startup companies? 

A: "A Private IPO" (to put a small spin on term coined by Josh Kopelman, CEO of US-based First Round Capital)

Q: Isn't IPO short for Initial Public Offering?

A: Well, fuddy duddy, welcome to Tech (Bubble / Not Bubble / Bubble / Not Bubble) Land. As of now, anything - including seeming Oxymora - goes.

In these unusual times, Indian startups dominate list of cases cited by investors in Asia and other parts of the world. Here's an extract (emphasis mine) from a post titled "Alert: Venture Capital Tsunami in South Asia" by Piyush Chaplot, Partner at Singapore-based Innosight Ventures :
Strategic investors such as Softbank, Rakuten, Alibaba, Naspers, etc. are throwing money as if there is no tomorrow. Sovereign Wealth Funds such as GIC, Temasek, QIA and Khazanah want their share of the pie. Even Private Equity firms do not want to be left behind.  Lets look at some mind numbing data first to feel the intensity of this tsunami:
  • Flipkart raised 3 massive rounds from Series F ($210M), G ($1B), H ($700M) in a 7 month span between May and Dec 2014.
  • Ola raised Series C ($41.5M), D ($210M) and E ($400M) in 10 months between Jul 2014 to Apr 2015.
  • Snapdeal raised more than $727M between May and Oct 2014.
  • Grabtaxi raised 4 rounds of funding from Series A, B ($15M), C ($65M) & D ($250M) in a 9 month period between Apr and Dec 2014.
  • Tokopedia raised $100M in Oct 2014.
  • Housing.com raised $18M, $19M and $100M between Apr and Nov 2014.
  • PayTM parent One97 raised $635M from Alibaba and SAIF partners in Jan 2015.
...I can never comprehend how a startup moves from Series A to Series D in 9 months. Such sudden influx obviously causes ripple effects. Early stage valuations are going through the roof...The race is now on to  reach a billion dollar valuation in the shortest amount of time. Hate to say this but to a certain extent these funding rounds now decide who is going to be the winner. Taxiforsure lost its battle against Ola not because their product or team were not great. But because, they did not raise such quantums at the right time. 
Kopelman too has warned about the dangers of the Private IPOs. Extracts from his post (emphasis mine):
I don’t think we’ll fully understand or appreciate the impact of the “private IPO” phenomenon for another decade, or at least until a full cycle plays out.

In my opinion, there isn’t nearly enough focus on “low frequency trading.” Public companies reprice daily. Private companies don’t have to reprice for years on end.

One key benefit of low-frequency trading in private companies is a long-term focus. It removes arbitrary time constraints on growth and profits.

...By relying on private financing events as “comps,” we risk pricing new financings (and creating new unicorns) based on stale valuations.
Sage advice indeed.

But who's listening? 

Who's got the time?

There goes the bell for adding the next $100 Million to the Venture Intelligence Deal Digest Newsletters and PE/VC Deals Database!

Venture Intelligence is the leading provider of data and analysis on Private Company Financials, Transactions (private equity, venture capital and M&A) & their Valuations in India. Click Here to view our products list including the FREE Weekly Edition of the Deal Digest: India's First & Most Exhaustive Transactions Newsletter.

Capitulation! E-Commerce FOMO catches up with the Best of Indian PE/VC Funds

The discussions at Venture Intelligence APEX'15 PE/VC Summit demonstrated how the latest E-Commerce wave - including the FOMO (Fear of Missing Out) factor - is challenging the convictions of some veteran PE/VC fund managers.

Veteran 1:
The key is to remain disciplined. Even if you have not managed to find a new investment opportunity for 24 months (because the valuations are unreasonable or whatever) and there is investor pressure to justify the fees they are paying you, it is important to back your conviction and not lose discipline.
Veteran 2:
Investments are a question of timing. I can keep investing in safe businesses that I understand well and continue to make steady returns. But the opportunity to make extraordinary returns comes only a few times and, as a fund manager, I'm paid to get those extraordinary returns. So, like it or not, I need to figure out how to get on to the E-Commerce bandwagon!
Come April, one of the leading VC firms in the country - which has very publicly stayed away from E-Commerce bets thus far -  seems to have completely capitulated. And is announcing hundreds of crores of investments in e-tailers each week.

A sizzling beginning to the summer indeed. Keep track of all the action via the Venture Intelligence Deal Digest Newsletters and PE/VC Deals Database.

Venture Intelligence is the leading provider of data and analysis on Private Company Financials, Transactions (private equity, venture capital and M&A) & their Valuations in India. Click Here to view our products list including the Free Deal Digest Weekly: India's First & Most Exhaustive Transactions Newsletter.