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Exclusive: SoftBank may invest in Kalaari Capital’s VC fund

25 July, 2017

Japanese telecom and Internet conglomerate SoftBank Group Corp is considering investing in a venture capital fund of early-stage investment firm Kalaari Capital, two people in the know of the development told VCCircle.

SoftBank might also separately buy Kalaari’s holding in Flipkart in a secondary transaction as part of its plan to invest in the Indian e-tailer, said one of the two people, who spoke on the condition of anonymity.

Kalaari had received a small stake in Flipkart after the online retailer bought the VC firm’s portfolio company Myntra in 2014.

The developments come at a time when SoftBank and Kalaari are said to have reached an agreement for the Indian VC firm to sell its stake in online retailer Snapdeal, operated by Jasper Infotech Pvt. Ltd, to the Japanese investor.

Kalaari’s stake sale in Snapdeal is part of a larger deal that SoftBank is pushing to merge the struggling e-tailer with bigger homegrown rival Flipkart.

The two people cited above didn’t specify whether SoftBank’s planned investment would be in an existing Kalaari fund or a new fund that the VC firm might be planning.

Kalaari had, in May 2015, said in filings to the US Securities and Exchange Commission that it had started the process to raise $275 million through two new funds. Later, in September 2015, Kalaari managing director Vani Kola was cited as saying in several media reports that the firm had floated a fund to mobilise $290 million. Since then, the VC firm has not made any disclosures on whether it has raised capital for these funds.

Previously, Kalaari had raised $150 million in its second fund in 2012. At the time, the firm had also rebranded itself—it earlier operated as IndoUS Venture Partners. IndoUS had mobilised $189 million in its first fund in 2006.

Responding to a detailed questionnaire from VCCircle seeking to know Kalaari’s fundraising plans, SoftBank’s possible involvement and stake sales in Snapdeal as well as Flipkart, Kola dismissed talk of such developments.

“Please stop publishing speculations. I am shocked that we are put in a position to respond to untrue statements to avoid unnecessary speculations and damaging rumours,” she said in a brief emailed reply.

Kola had, in May this year, resigned from the board of Snapdeal amid the negotiations for the online retailer’s sale to Flipkart.

The VC fund, which is said to have recovered its investment in Gurgaon-based Snapdeal with good returns through secondary sales earlier, still holds around an 8% stake in the e-commerce firm.

SoftBank declined to comment when asked if it planned to invest in a Kalaari fund. “Any deal information is confidential and we don’t comment on that as well as on speculation,” it said in an emailed reply.

The Japanese company, led by billionaire chairman Masayoshi Son, has been making efforts to drive a merger between Snapdeal and Flipkart for the past few months. It is the largest investor in Snapdeal but the value of its investments has eroded as the e-commerce firm struggled due to mounting losses and rising competition. A deal with Flipkart would value Snapdeal less than $1 billion, far lower than its peak valuation of $6.5 billion.

SoftBank typically makes large private equity-style bets on companies directly, though it does sometimes invest as a limited partner in venture capital funds. It had, in fact, started at the turn of the century a VC fund that is now known as SAIF Partners.

The Japanese firm managed the SoftBank Asia Infrastructure Fund as a general partner and had roped in US networking giant Cisco as a limited partner. Subsequently, SAIF Partners managed a fund in which SoftBank acted as a limited partner. Later, SAIF Partners’ India team had spun out of the former avatar that had a mandate to invest in both China and India. It couldn’t be ascertained if SoftBank still has any LP interest in current SAIF Partners’ funds.

Earlier this year, SoftBank raised a mammoth $93 billion private equity fund to back tech startups globally. The Japanese firm had said at the time that, while the Vision Fund would invest at least $100 million directly in companies that meet its parameters, SoftBank itself might continue to invest in early-stage VC funds or make other strategic investments.

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Exclusive: SoftBank may invest in Kalaari Capital’s VC fund

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