Stars Aligned to Foretell Future of Indian Private Equity & Venture Capital

Dear Colleague,

In 2004, the buzz around one mega exit – of Private Equity investor Warburg Pincus from Bharti Airtel – got institutional investors across the world excited about the Indian Private Equity opportunity. Naturally, there was a boom in PE fund offerings from India- typically focused on minority growth capital type investments – to cater to this rising appetite. And billions of dollars flowed in search of the next big Bharti.

Now, in one forum after another, these investors – “Limited Partners” (investors in PE/VC funds, LPs for short) – have been hyper critical of Indian PE fund managers for their lacklustre returns.

Indian PE sure seems to have hit rock bottom.

Is There Hope?

Admidst a lot of skepticism, the BSE Sensex was the best performer among emerging markets (aka BRICs) in 2012 after being the worst performer in 2011. Recent months have seen MNCs from Europe to Japan and, of course, the US – in their almost desperate search for growth – very actively snapping up companies Indian companies: whether it’s high profile consumption targeting sectors (think United Spirits), the relatively quieter pharmaceuticals ones (think Claris LifeSciences and Orchid Pharma) or the very quiet but very many acquisitions in the Industrials segment. With so many PE-backed companies lined up for exits, the signs on the liquidity front look good for 2013 at least.

The Bloom?

Recent exits in the tech industry – think MakeMyTrip, InMobi, etc. and performance of rising stars like Flipkart, RedBus, etc. – have got even some of the normally wary LPs interested in the Early Stage segment. As a result of which, new VC funds are expected to bloom. Which was exciting enough for 2012 to witness one new Accelerator to sprout up each month: The Morpheus now has Microsoft and 500 Startups for company (competition?). And the original Accelerator – US-based Y Combinator – continues to attract over a couple of exciting Indian startups to flip over to Silicon Valley for each of its batches.

What are these Accelerators – who are churning out companies by the dozens each year – betting on? That Angel Investors/Seed Funds will provide follow on funding to their promising hatchlings. The membership at the angel networks is booming with a little “Old Money” folks; some “Been There, Done That” First Generation Entrepreneurs; more “vicarious startup thrill seeking” corporate executives and lots of hope for quick flips – 3x return is the oft used multiple – when the “Series A” (first round VC funding) happens.

The Bottom Line?

It’s all hyper connected. The accelerator phenomenon is absolutely great for entrepreneurs searching for early validation, mentoring and first money for their ideas. And a great feeder for the angel investors and seed funds. Who in turn need a vibrant set of VC funds to provide scale up capital. Who need PE funds to allow them to take some “chips off the table” (via Secondary Sales) and prepare their portfolio companies for the public markets. The IPO markets are of course vital for the PE folks to exit. Which is heavily influenced by the economy.

So, Who Can Foretell What’s to Come? The Stars?

Let’s look at it backwards…

About The Big Picture?

How about someone who was Deputy Governor of the Reserve Bank Of India until last month? And Chief Economist-Asia-Pacific at a top global rating agency before that.

About The Public Markets?

How about the CEO of the Asia’s Oldest and best known stock exchange, the BSE?

About (The Mess in) Private Equity?

How about the founder of India’s Best Known Home Grown PE shop? How about the India Head of the World Biggest PE Firm? The Global Co-Head of Private Equity at a MNC Bank (who no one seems to have informed that any portfolio – especially one constructed in India – should have a few lemons)? How about if we threw in an outspoken IAS officer – a batch topper, Harvard Grad and who is doing his PhD researching Indian PE – to needle the PE Stars?

About Venture Capital?

How about two Managing Directors from the best known VC firm in the World, India included? And many, many more rising stars (from accelerators, seed investors and growth capital funds).

About Starting Up, M&A and the Life After?

How about the founders of a pioneering KPO venture (acquired by Thomson Retuers) and a pioneering assessment services firm (acquired by Manipal Group) who have since turned investors?

Agree that These Stars can (at least somewhat) foretell the future and Connect the Dots in the Indian PE/VC – Entrepreneur landscape? It’s now possible to listen and meet all of them in One Place in One Day!

At The Venture Intelligence APEX’13 PE/VC Summit & Awards

When? February 13 (Wednesday), 2013

Where? Mumbai (ITC Grand Central – Parel)

How can you sign up to participate?

After all, the Stars Don’t Align Like this Very Often!!

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