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“We are a long-term, patient investor; if you have to build world class companies, it does take time,” believes Bessemer Venture Partners, India
They are perhaps, as old as the concept of venture capital itself! Some of the best known technology brands globally have been seeded by Bessemer Venture Partners–the oldest VC firm in the United States. Bessemer steered its way into India in 2003 and made its first investment in year 2005. While the biggest of big, share this regret of “we should have invested much before in India,” this fund has no regret. According to Bessemer, the India growth story has just about begun and that they are a long-term and patient fund. In an exclusive tête-à-tête with 4Ps B&M, Devesh Garg, Head of Bessmer’s India practice, dwells at length on the correct recipe of creating a world-class company...
When did Bessemer actually got serious about India growth story?
In 2003-04 we started getting interested in India. I and my partner Rob Chandra, made the first trip in December 2002. We felt that India was becoming a really interesting place to invest in. An observation we made at that time was that India was not ready for traditional hi-tech investing, the kind of investing that we specialise in. We came to the conclusion that Indian investing will primarily be non-technology oriented. So, we started getting active in 2003. In 2004, we established our offices – one in Mumbai and another in Bangalore – and for the last four years, we have been actively investing in India. We have one of the largest India dedicated teams in place, comprising 14 people, 10 of whom are investment professionals. I have also physically relocated to India. I don’t fly down from US, make an investment and fly back. All this shows our commitment toward India, as we think long-term growth prospects are tremendous in the country. We have $500 million of committed capital across our two funds in the country.
What is Bessemers’ unique investment philosophy? How are you different from other service provider?
We look to find a strong alignment between our Limited Partners (whose money we have invested in) ourselves and the promoter/entrepreneur that we back, which makes our long-term success easier. We are very rigorous in our research and stay focused. We like to look for emerging growth sectors that offer things off-the-beaten path. This is because we have a long-term view and therefore stay very disciplined. Our investment size ranges between a dollar to somewhere between $30 million. What I mean by a dollar is that we would love to invest in seed companies too. We will take on entrepreneurs, we are really excited about that, give him the seed capital and help him start the company.
We add value in three areas – first, we have expertise in scaling and building operations, worldwide. Second, we have the ability to source customers. No matter what business you are into, you are always looking for customers whether local or global) and we have the ability to help investees with that. Lastly, financial sophistication. We understand how to assist in areas of financial sophistication, as we have operating partners to help with that.
Which are your most promising investments in India? And what sectors are you bullish on?
We are investors in Anant Raj industries (Construction and Infrastructure Developers), in Motilal Oswal (Financial services), Shriram EPC (servive provider for renewable energy projects), OnMobile (VAS for mobile operators), Deccan Chronicle Holdings (media). We have invested in a couple of start-ups as well, like Sarovar hotels (hospitality)and Sunil hi-tech (company focussing on power sector). We are also investor in Lloyd Electric, KS Oils and NetAmbit. We had four IPOs in a relatively short period of time, but we continue to hold on to our positions because we feel that there exists a positive long term opportunity. IPOs are not necessarily an exit event, it’s just a financing event and we still believe that these companies have a long way to go. Besides, we are a long-term, patient investor; if you have to build world class companies, it takes time. We invest across all geographies and sectors and our Indian portfolio reveals that. We forsee an investment boom in the infrastrucure space and all businesses that are linked to the growing consumer class of India, particularly growth-oriented, non-tech areas.
Apart from growth capital, what else does Bessemer bring to the table?
Within Bessemer, we have this concept of operating partners. The idea is to bring value added services to the companies. At the end of the day we are a service provider and we want to make sure that we have all capabilities in-house to add meaningful services and assistance to portfolios of companies that they should want. It is something that we do as a part of our association with each investee.
We have Sridhar Iyengar (former chairman and CEO of KPMG India), who brings deep experience in tax & audit; Mandeep Khaira (senior executive from Dell) – an expert in operations and procurement; Yagnesh Sanghrajka (former Global CFO for Hinduja TMT), so he knows how to deal with family-owned companies. We find promoters and entrepreneurs that have the ambition to create world class companies and ability to recognize things that we bring, and then jointly partner to create that.
How supportive is Bessemer when it comes to individual business ideas?
Oh! very supportive, our culture, our history in the United States is very centric towards that. So in terms of practice, we are comfortable with doing that and we have done it in India as well. For example, BA systems or Sunil hi-tech. If we find an entrepreneur and an idea that we think has all the merits of a top rated investment, we will do that in India. BA systems is an example of taking an idea we believed in, forward. He (the promoter) has created the ‘First Made in India Router’ EN 3500 and is doing well.
Your advice for Indian entrepreneurs who are looking for funds?
Markets today in India are at an early stage. An average Indian promoter is very inexperienced when it comes to dealing with PE/VC. It’s hard for them to distinguish between a Hedge Fund money–typically hot money–and long term capital (a PE or a VC). They think that a dollar is a dollar. An entrepreneur/promoter should be careful from whom to take money. They should find somebody who has value-added capabilities, somebody who has a successful investing background, somebody you know is going to be with you for the long run. Businesses too undergo cyclical ups and down. You have periods of rapid expansion, then possible sluggishness. So, in case of a slowdown, if the investor pulls out the plug, you (the investee) are gone.
Can you quantify Bessemer’s returns in previous years?
Well, I won’t get into specifics, but name a fund that has so many IPOs to its credit. More than 100 of Bessemer’s portfolio companies have gone public on exchanges from the NYSE and NASDAQ to London’s AIM and India’s BSE. That says it all.
Edit bureau: Asif Ahmed
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Source : IIPM Editorial, 2008
An Initiative of IIPM, Malay Chaudhuri and Arindam chaudhuri (Renowned Management Guru and Economist).
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