The following interview with Joydeep Bose, Senior Director, Corporate Development, Investments and Acquisitions at Cisco appeared in the latest quarterly Venture Intelligence India Venture Capital report.
Venture Intelligence: Can you start by providing us a quick overview of Cisco’s venture investment activities in India.
Joydeep Bose: Cisco Investments and M&A group is focused on investing in India’s growing markets in technology areas such as Video networking and social collaboration, Cloud Computing and enabling software. India is a key geography for Cisco both as a market and as a source market for innovation. We have seen a huge investment opportunities in India, especially in the areas of cloud and broadband services, media and entertainment and the traditional Indian industry strongholds such as software and advanced services. We are also seeking faster the adoptions of technologies like LTE and national broadband network in the Asia Pacific and Japan regions. India ranks number one in terms of our focus followed by Korea, Australia and Japan.
We also enable indirect investments by taking LP positions in other funds. These are typically done to enable us to enter a new market segment, enforce a pre-syndication of investors and tap into the expertise of a highly skilled GP teams for specific areas of industry or geography. SAIF and Aavishkaar are a few funds that are active in India at this point in time where Cisco is an LP.
VI: Given the nature of the promoters – A.R.Rehman and Shekar Kapur – there is a lot of buzz and expectation around Qyuki Digital Media. How did Cisco come across this investment and what are you expecting from Qyuki in the near future?
JB: Cisco believes in investing in areas where technology is applied to business and creates unique and compelling use cases for rapid consumption. Qyuki fits in perfectly in the holy grail of technology, branded gold class content and user centric collaboration using a multi modal delivery channel over high speed video enabled networking. Cisco Corporate Development continuously seeks unique new ideas in the market and often helps entrepreneurs ideate, refine and adopt a technology enabled business model before an investment decision is made. Qyuki followed a similar process of early engagement and incubation with the celebrities that you mentioned.
Like all strategic investments, Cisco seeks strategic value and financial return from its entire portfolio. We expect Qyuki to create one of the largest online human networks for branded content centric collaboration in India using Cisco technology. Although it’s still early days but we expect Qyuki to be one of the biggest financial success stories in the subcontinent.
VI: (Not counting A.R.Rehman and Shekar Kapur!), would Cisco invest in "two guys and a powerpoint presentation"? Do you have a minimum revenue requirement? Also, is there any minimum/maximum in terms of the capital that you can commit to a single company?
JB: Cisco is usually not a seed stage investor, unless there are significant “assets” and value in a proposal that makes the idea unique and unparallel. However other than seed, we are stage agnostic in our investment approach. The key criterion is always innovation, intellectual property, early customer/eco-system endorsement and value to Cisco.
As we draw from our balance sheet, we are not limited by any fund size and/or any ticket size. Our investment in India ranges from sub million dollars all the way up to approximately about $40 million so far in one round.
VI: In general, what are the key qualities you look for in an investment? Apart from Qyuki, Cisco’s investments have involved one or more other financial investors. Is this a requirement or just a preference?
JB: We are no different from typical TMT based tier 1 technology VCs globally. We value the power of the concept and the idea, the uniqueness of the innovation, the early market endorsements, the management team and its ability to scale the business and last but not the least the Cisco strategic angle. All investment targets are thoroughly analyzed for both business and technology fit. We also invest through syndication by working with strong global and regional funds that act as the lead investor in the round notwithstanding there are exceptions and we could also lead a round for highly strategic technology areas.
VI: While most financial VCs have been making a lot of investments around consumer Internet & Mobile companies in India, Cisco does not seem to have participated significantly in those types of investments. Any particular reasons? How, in general, do you attract deal flow?
JB: Cisco invests in unique technology and consumptions models as far as internet and mobility is concerned. We have invested in so called “internet” companies before and would continue to do so. However, the key criterion is innovation; in terms of technology usage, consumption models and relevance to Cisco technology. We find typical consumer internet companies that exploit reach, economy of scale and optimized distribution as their value proposition less attractive from a Cisco relevance point of view. We however are very keen to invest “around” those business models, an example of that being behavioral and consumption analytics, unique advertisement servicing, secured payment technologies etc.
Cisco deal sourcing follows both an inside out and outside in approach. Our investment managers work on specific investment themes and scan the market for startups in those areas. We then take a targeted approach to make connections with the founders of those targets or their existing investors. This is the most effective deal sourcing method for us. We also are connected to the larger eco-system of VCs, Bankers, incubators and industry forums that provide us with deal reach outs and that are the outside in approach.
VI: When it comes to exits, does Cisco have a strategic consideration - like seeking a “first right of refusal” to acquire the company, etc?
JB: We follow a typical VC agreement culture when we make the funding and intend to exit a company in four to six years. I am unable to make any generic comment of specific rights that we seek from our investments.
We recently made our first exit in the country from data centre services provider Netmagic in February (in which we had invested in the company in October 2010).
VI: How does a vocational education company like Global Talent Track fit into your thesis?
JB: Cisco has a long track record of driving IT market growth through investment in the innovation economy. Our investment theme also strives to enable adoption of technology in new and unique usage models. Collaboration is a key enabler for the education segment by creating student, teacher, content pedagogy through unique time and space shifted learning environments. GTT has been a leader in the finishing and vocational training market in India and APAC and leverages Cisco’s cloud enabled collaborative learning systems to scale and grow rapidly. Our partnership with GTT also helps us deliver our projects in the government sectors that follow Cisco’s inclusive growth theme, as one of the key member of the eco-system.
VI: Cisco has invested in the new fund of well known social venture investor Aaavishkaar. What attracts Cisco to the social space?
JB: Reinforcing its commitment to country transformation and inclusive growth, Cisco invested in Aavishkaar as an LP in their Fund II. Cisco plans to invest in and collaborate with other investors to drive sustainable business models with social impact that utilize the power of the network. Working with Aavishkaar, Cisco aims to take advantage of its expertise and promote technology-enabled inclusive growth in the area of social entrepreneurship. Though the Aavishkaar partnership we have created a coalition of some of the best corporate ventures and multilateral organizations that help us drive our technology for inclusive growth agenda and market expansion charter.