New Enterprise Associates Inc. (NEA), which raised the largest fund by a venture firm in the US at $2.5 billion, is looking to rev up its India play. The firm, which invests in mid-late stage companies in India, is looking to invest 15% or $375 million of this fund in India. It is looking to close three to four deals in India every year and is eyeing the services and domestic consumption play, said Bala Deshpande, senior managing director who heads NEA’s India office.
“While we have targeted a ticket size of $30 -80 million for our investments in India, capital will not be a constraint for the right opportunity,” said Deshpande, who is bullish on the services play which accounts for a chunk of India’s gross domestic product (GDP).
The idea is to pick companies which are small to large and back leaders in plays which will emerge as large sectors, said Deshpande, who joined NEA from ICICI Venture in late 2008.
During her near-decade-long stint at ICICI Venture, one of India’s largest PE funds, she invested in and worked with companies like Pantaloon Retail, Air Deccan, Info Edge (Naukri.com), among others. NEA is looking to invest in areas like education, microfinance, healthcare, waste management, energy efficiency, among others.
NEA’s 13th fund accounts for an estimated 17% of all US venture capital funds raised in 2009 and brings its total committed capital to more than $11 billion. The new fund from NEA, a 31-year-old venture capital firm, comes at a time VC and PE firms have struggled to raise money. “We have a history of consistent returns with LPs,” said Deshpande.
But NEA also faced challenges in the tough environment as it took the firm six months to close the fund rather than its usual two months, she added.
Back in 2006, when NEA did not have a direct presence in India, it also backed an affiliate fund named NEA-IndoUS Ventures. This $189-million fund, which was started by Vinod Dham of Intel chip fame with Vani Kola and Kumar Shiralagi, has now been rebranded as IndoUS Ventures. While IndoUS continues to look at early stage opportunities of sub-$10 million, NEA would look at deals with sizes in excess of $10 million.
The fund will also invest in China as investment firms look to diversify across geographies. Several VC firms like NEA and Greylock, both of whom invest from their global funds in India, have also managed to raise large funds recently.
NEA right now has five-member India team, with offices in Mumbai and Bangalore. Deshpande plans to add two more people to the team, including a senior member, depending on the pace of investments. “One thing that is true of the Indian market is you have to be aware of what is happening on the ground. We have seen big team build-ups and the cost of a big team is disintegration,” said a cautious Deshpande.
NEA was able to close three deals in 2009 in India when PE investments saw their worst fall since four years in India. “It was a great opportunity since the valuations were more realistic than in 2007 and 2008 and it was important that we take advantage of the opportunity,” said Deshpande.
Last year, the firm invested $13 million in reverse logistics player RT Outsourcing and also picked up a stake in electronic payments processing firm Financial Software & Systems (P) Ltd for $60 million with Jacob Ballas Capital. ValueFirst Messaging, a Delhi-based mobile messaging services provider, also got $6 million in funding from NEA.