Capvent AG, the Zurich-headquartered fund of funds, has started investing in the country out of its second fund of $250 million exclusively set aside for India. Capvent’s Co-Founder and Managing Partner Varun Sood told VC Circle in an interview that the fund is looking at first and second time funds to invest their money. Capvent set up shop in India in 2004, and has already invested out of its first fund of $125 million, besides drawing additionals funds from its global corpus.
“We are keen on first and second time funds. They should be specialist funds, with unique skills in executing deals,” Sood said. By specialist skills, Sood meant that the guys who knew their areas very well, who have industry experience, and not the “banker types” who sit in Mumbai.
Capvent will look at funds both in venture and growth capital areas, while will avoid private equity funds who invest in public markets. “The key thing is we are interested in sponsoring new funds. We are open to new groups who have unique edges. And we are looking to be the first institutional money in that fund,” said Sood.
18-24 Month Time Frame
They will be committing the entire $250 million corpus in India over the next 18-24 months. That is good news for many first and second time managers who find it difficult to raise capital from limited partners in the US and Europe as they look for a long track record of managing funds.
Capvent was founded in July 2000 by Managing Partners Tom Clausen and Varun Sood. Since they set up shop in India, Capvent has invested in 12 private equity and VC funds in India, which have a total of 100 portfolio companies. Sood declined to name the funds they have invested. According to independent sources, Capvent is a leading backer of Gaja Capital Partners which is raising a $200 million mid-market fund for India. Gaja has invested in companies like Educomp (it exited this company last year), Vishal Retail and Career Launcher.
Sood is also clear which funds he will not invest in. “We are not interested in generic funds who sit out of Bombay and receive calls from investment bankers,” added Sood. “We are looking at funds who have specialist skills, strong teams, industry experience, and the skills to execute deals,” Sood said, “We are not looking for undifferentiated strategies.” Capvent is currently tracking about 70 funds, and has shortlisted 30 funds in India. “We are looking for the below the radar kind of guys,” he added.
Is there a slowdown expected in private equity dealmaking? Sood said he was seeing a slump in investment appetite. “Because entrepreneurs have not adjusted their expectations with the drop in market value,” he said.
The other fund of funds who have on the ground presence in India are Evolvence India Fund (EIF) (which has a corpus of $67.8 million) and Thomas Weisel India Opportunities Fund (with a corpus of $60-odd million) which has been acquired by Guggenheim Partners. Then there are large global funds like Partners Group and Rho Funds who are looking at setting up shop in India, while there are many others like US-based HRJ Capital who invest in India through their visiting fund managers.