US headquartered venture capital firm, DFJ has closed its latest fund- Draper Fisher Juvertson Fund X at $350 million. The monies will be used to invest across the DFJ global network comprising of 17 network partner funds spanning four continents and assets worth $7B under management. The venture capital firm will look to invest across the cleantech, IT, mobile, and life science sectors.
“India, China and the US are the key geographies for the latest fund. About $50 million of the total amounts raised or more (depending upon the opportunity set) would come to India”, said Mohanjit Jolly, Executive Director, DFJ India, explaining the road map and the
relevance for India with this freshly minted fund. DFJ follows a highly integrated global network approach where all the partner firms of DFJ spread across various geographies invest out of the core global fund, and do not house geographies focused independent funds.
Cleantech will form the major part of the investment theme for DFJ India – in terms of dollars put to work, followed by consumer media as appears from the current pipeline of investments.
“From 8-10 investments that we are looking at, about 30% of the investments would go in the cleantech area but the size of investments in the space could be higher from what it looks like. About 50% of the investments will be in consumer internet space, especially with exciting business models spawning in the mobile – 3G connectivity domain, and other 20% would essentially would be offline business models," he said. Jolly added that education and healthcare are being targeted as areas of growth not only for DFJ India but also by DFJ globally.
From the latest fund, DFJ would also seek to have a blend of a more mid-stage to late-stage deals along with an early stage approach that it has adopted till now. “The DNA of DFJ is early stage. But it will be a blend of more late mid stage to late stage deals," said Jolly. A lot of venture capital funds in India are transgressing from a typical pre- revenue seed fund- early stage approach to doing more of mid-stage to late stage deals as LP’s seek to make investments in “spaces where the exit horizons are nearer”.
Besides its investment in iYogi and Cleartrip- DFJ has pretty much maintained an early stage approach, with investments in about 20 companies till now: Komli Media India Pvt. Ltd, D Light Design Pvt. Ltd, mChek India payment Systems Pvt. Ltd, Canvera Digital
Technologies Pvt. Ltd, Pressmart Media Ltd, Attero Recycling Pvt. Ltd, Seventymm Services Pvt. Ltd, Gingersoft Media India Ltd, Vegayan Systems, Mahindra Reva Electric Car Co. Ltd, Fatpipe Networks India Ltd, Deeya Energy Inc, Naseeb Networks etc.
On whether DFJ is looking to make exits in India this year, Jolly said that they would wait on the sidelines to secure higher returns. “The companies have grown but the absolute outcome has to be higher to move the exit needle and return substantial amount of money to our investors as all these investments were made out of a large fund of $635 million," he said.
DFJ- the venture veteran with about 25 years in venture investing has backed a number of high-profile businesses, including Baidu, China’s leading search engine; Tesla Motors, the electric-car manufacturer that recently listed on the Nasdaq stock exchange, raising just over $225m in its IPO; and internet telephone phenomenon Skype, picked up by eBay.
Venture Industry Losing Sheen
According to a report in Altassets, DFJ has fallen short with the latest fund in its series, raising $350m of its $400m amended target – cut from the initial $600m it hoped to collect when the vehicle was launched. One of the oldest Silicon Valley firms raised $650 million
for its fund IX. A harsh fund raising environment and a conscious decision to have a fund of small size were the key reasons playing out here – explains Jolly.
Against the backdrop of a liquidity challenged environment, institutional investors across the globe argue if venture capital investing still makes sense. This is indicative of the fact that
institutional investor’s interest in venture industry going down and looking at more late stage assets where exit horizons are clearer within alternate investments – private equity, hedge funds, etc.
According to VentureSource, $21 billion was invested by the venture capital asset class in 2009, and this amount was the lowest investment total in the 10 years. Data also suggests that venture investing is down (32%), exits down (14%; slowest exit year for VC backed companies since 1995), fundraising down (56%), IPO’s almost non-existent (8 venture backed IPOs in 2009). These recent trends point towards a shakeout in the industry and that good and disciplined GPs that are not badly affected could take this opportunity to become stronger and differentiate from those who are suffering, explains Jolly.
“The environment has changed. LP’s are now looking for those who have discipline in investing style and are capital efficient. Those like DFJ which follow a global network approach will continue to grow stronger," Jolly added.
Other venture funds that raised money in 2009 were New Enterprise Associates, which raised $2.5 billion, and Norwest Venture Partners which closed its eleventh fund in the fourth quarter after raising $1.2 billion.