Eating into VC’s pie

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: by these ventures in most of the cases is below $20 million and is not too big to talk about. The funding is done in the second and third round and the exit route could be an initial public offering or an acquisition by a third company.

Says Joydeep Bose who heads Cisco Ventures, “Typically, we would look to invest in companies that have an existing intellectual property and service offerings in the market, or revenues in the range of $5-15 million.”

Their investments in smaller companies are a means to validate their business model and provide them leadership bandwidth, says Bose. Till now, the corporate venture capital in the tech segment was mainly devoted to IT services, BPO and products and application space. This seems to be changing as venture funds are now eyeing the scalable local market that can absorb innovation. “Cisco’s venture capital commitment to India is a reflection of the maturity of India as a technology marketplace,” adds Bose.

Siddhartha Padam of Chespaeake Group feels that the corporate ventures will now be more interested in product space rather than in pure play IT services.

Analysts believe that Google, Yahoo and SAP will play an important role in this direction. Though the corporate venture funds always want to have a decent return on investment, it is not always the only factor driving the decision to invest.

“Unlike the private venture capital, corporate venture funds also look at their business strategy and how funding will help their future business vision in their product and application space,” says Padam. For instance, Cisco uses investment to learn about new markets and add more value to the product and services roadmap. The networking equipment major sees immense opportunity in creating technology that will provide content across time and device.

“This is a challenge for content owners and for service providers to serve the right content at the right time in the right format,” says Joydeep Bose. In India, Cisco is looking at ways to help content owners and service providers to offer contents.

If Cisco is investing in companies working on content transmission and creating right format, Microsoft is learnt to have decided to create an incubation centre in Pune for start-ups interested in building products.