We will look selectively

Updated: Nov 11 2006, 05:30am hrs
Terry Garnett, managing director of Garnett & Helfrich Capital prefers to call his venture capital firm a venture buyout company. Incorporated in March 2004, Garnett & Helfrich Capital has already raised $350 million in funds. Unlike traditional venture capitalists, Garnett & Helfrich Capital does not invest in start-ups or newly-formed companies. In the emerging venture buyout segment, it focuses on mid-sized technology spinouts.

Garnett & Helfrich Capital has already added three companies including Wyse Technology, Ingres Corp and Blade Network Technologies to its portfolio. The company recently announced its investment in Open Water Inc, a software company and Celunite, a provider of Linux-based mobile platform solutions and services. Garnett & Helfrich Capital is currently in the process of raising a $850 million second-fund which it aims to close by this year end.

Prior to co-founding Garnett & Helfrich Capital with David Helfrich, Garnett was both a general partner and venture partner with Venrock Associates, the technology venture capital arm of the Rockefeller Family. Garnett has served in a number of major technology companies including Oracle where he was the member of Oracles executive managing committee. He was the co-founder and investor in Crossworlds Software Inc, which went public and was later sold to IBM. FEs Somasroy Chakraborty caught up with Terry Garnett recently to discuss the companys expansion plans in India. Excerpts:

Can you talk about your investment plans in India

In the past few years, most of our investments have had an Indian component. Out of the five deals we have completed so far, two of them had Indian entrepreneurs. So I think, going forward we will continue with the same model. Whether the investments are in the US, North America or Europe there will probably be components that are actually here in India. We are looking at businesses that are based in India.

Are you talking to entrepreneurs based in India

Yes. There is a possibility (of business) and we have got some of those conversations going on right now. But I cannot say when they are likely happen but we are definitely into discussions.

In a consumer-driven economy like India what will be your area of focus Would you be focusing more on consumer-oriented sectors

We would consider investments where it is more customer-oriented. We have been investing in some large-scale systems but what we are doing in the mobile phone area is again more consumer-oriented.

So far most of your investments are in technology-product companies but India is better known for technology-services companies. Does that mean that in India there could be a shift in your focus and you would invest in technology services companies

Yes, it is true that there are good software services companies in India. We should wind up buying in product companies outside India and helping them with (an investment in) service companies here. There is a good base of services companies here and we might put together the pieces that we buy elsewhere (with investments here).

What is the average rate of return on your investments Do you expect a similar kind of return from your investments in India

As of now we have not sold any of the businesses that we bought. On an average, we stay invested for four to five years. Historically, what we have seen in our career as venture capitalists, is that we get normally four to five times return on the invested capital. We do expect a similar kind of return from our investments in India. We would not go and do investments unless we have the similar kind of return profile.

Would you be looking at pipe investments in India

We have actually looked into some of those options. So if we think it is comfortable with the management of the company and we could bring value to the company we would do it. But if it is just capital infusion, we will not be interested. If we feel that there is a technology company where we can bring value to and be on the board and active, we will consider that.

With the Indian stock market at its peak, what kind of valuation you would be looking at for your pipe investments Do you feel that the prices are overheated

We will look selectively. We like situations where the company may be losing money or they would be in trouble. So those will not be the ones that will be at a premium. The companies that are doing well and want capital are not the kind of candidates for us. We will look for companies that are in trouble and need help, maybe a new management, new products. Those companies would be probably selling themselves at discount.

Recent reports suggest that Wyse Technologies is planning to set up a manufacturing unit in Bangalore. Is that true

Wyse is currently doing software development here. But I am not aware of any change that is taking place.