‘There is a worldwide consolidation ... start-up funding is not in jeopardy at all’

Gaurav Burman is vice-president, global private equity, Dresdner Kleinwort Capital Partners L.P. based in New York. Mr Burman focuses on the media and technology sectors with responsibility for both direct and fund investments. Dresdner Kleinwort is in the process of raising a $100-million fund for India, which will be managed by a team that was formerly with ICICI Ventures.In an interview with Priya Srinivasan, Mr Burman outlines his views on the current VC and private equity scenario in India and worldwide. Excerpts:

What sort of worldwide trend do you see emerging in the venture capital/private equity industry?
Earlier you had angels with successful past experiences as entrepreneurs and venture funds who had raised money from both individuals and institutions, they all did well since they could flip their investments relatively fast given the boom in the public markets, but in the world as it stands today the investor has to stay in the company for at least five years. Now to sustain the company’s operations in that time period and ensure that people are well paid the fund will need a lot of staying power, which is why institutions will begin to play a bigger role now in funding.

To add to this VCs have lost their risk appetite. There is a consolidation underway worldwide wherein larger institutions are poised to play a much bigger role in the business.

Specifically in India, what sort of trend do you see emerging, is start-up funding in jeopardy?
Start-up funding is not in jeopardy at all. In the US and Europe some VC funds have already started looking at start-up funding once again. Investors the world over have been shell shocked and are in a state of inertia, but that is changing now. VCs in India will soon start investing in start-ups again. Funds in India are sitting on a lot of dry powder and will begin to invest soon.

How do you see the VC industry in terms of the profile of funds in India changing?
Earlier two or three partners went out and raised funds from individuals and institutions, now you may see a lot more of institutions either buying into existing VC funds or setting up funds themselves. I also see a lot of syndication when it comes to individual opportunities. For instance if a company’s business plan warrants a certain quantum of investment, the VC will put in part of the money in and then bring in other VCs to complete the round.

What potential do you see for restructuring or buyout funds in India at this stage?
Personally as an Indian, the opportunity to buyout and restructure for me is the most exciting one. It is also a lucrative business, but I don’t think India is ready for those kind of funds as yet, for a variety of factors.

The first is that the cost of capital is not efficient, transparency and availability of information also leaves a lot to be desired. Promoters still have control over businesses with very small shareholdings and its very hard to remove the management under the circumstances. India will present those opportunities in time.