IP’s the new hype as VCs get interested

Prachi Verma in New Delhi

Intellectual property (IP) software development companies are likely to step in as the new kids on the ‘venture capital (VC)’ block, according to industry experts.

According to National Association of Software Services Companies (Nasscom) and a Rs 150 crore venture fund-Infinity Ventures, investments in IP solution companies will be an attractive bet coupled with high risks for the VCs.

Infinity recently invested Rs 5 crore in an IPR software development company called Adamya and intends to invest in more.

“We will be very aggressive in the next 2 years in funding IP solution companies as they offer high returns. India must follow Israel which has created wealth by investing in IP ventures,” Infinity Ventures co-founder and director Gaurav Dalmia said.

In all, Infinity has invested Rs 90 crore and is currently close to investing over Rs 5 crore each, in a software company and an IT-enabled services company. “It is not that VCs have disappeared. Instead, it appears that entrepreneurs have run away,” he said.
Nasscom points out that VCs are investing in low risk areas like IT-enabled services and should look at investing in high risk companies dealing with IPR solutions, bio-informatics, etc.

“VCs should stick to their role of investing in high return areas even though they involve high risks. Companies offering IP solutions is surely one such area and the VCs must closely look at these companies,” according to a Nasscom official.

On the other hand, a Delhi-based VC firm IFCI Venture Capital Fund (IVCF) and a recently converted private equity placement firm called CDC Advisors Pvt Limited have shown their disinterest in IP companies.

Investing in IP companies is not a winning game for CDC Advisors, which has invested close to $50 million in the last year and is ready to invest anywhere between $50 million to $ 150 million in this year, according to its chairman Donald Peck.

On the other hand, IVCF which has invested about Rs 2 crore in the last three months in TMG, 4CPlus, Globsyn Technologies, says it has not received any proposal from IP software development companies.
“We have not received any proposal from any softwre company offering IPR solution and may not look at them in future,” IVCF chairman and managing director AC Ahuja said.