German enterprise software major SAP AG has on Wednesday announced that its venture arm, SAP Ventures, will extend its service to the Indian market and plans to invest in six Indian start-ups in the next one year. According to the euro 10.24 billion SAP AG, SAP Ventures helps build industry-leading companies by partnering with outstanding entrepreneurs and top-tier venture capital.
Though SAP declined to reveal the corpus of the fund set aside for the Indian market, going by the history of an average investment of $4-5 million in each venture by SAP in the US and European markets, the total Indian investment would be around $30 million in the next one and half years at best. The corpus fund will be part of the $1 billion investment in India between 2006-10.
At present, SAP Ventures, which started its operations in 1997, has its investment limited to new companies based in the US and Europe. SAP’s venture capital unit has invested in 75 US and European companies and at present holds investment in 38 companies.
Some of the companies where SAP Ventures still has stake are GrouNDWORK, an open source-based systems company, INTALIO, an open source business process management vendor and Payscale, a company working in global online compensation data.
Ranjan Das, president and chief executive officer of SAP Indian Subcontinent, said, “We have decided to have the presence of SAP Ventures in the Indian market.” Das was addressing the press at the SAP Summit 08. The SAP Ventures is run by seven member partners who report to SAP’s chief financial officer. Jai Das, one of the partners, will be in charge of the India investment decision. According to Jai Das, SAP Ventures invests typically in SME companies with an annual revenue of $5-10 million. “We enter in the second and third round of funding and the cap is maximum of 20% of the total equity.” Few of the recent success stories of SAP Ventures are Red Hat, Virsa and MySQL. “In MySQL, when Sun acquired the company, we have been able to get a return of five times in just two years,” said Jai Das.
Regarding the companies where SAP Ventures would like to invest, Das said that the two most important considerations were return on investment and the nature of technology. “Depending on how innovative the company is and the prospect of a good return, we recommend investment which is finally approved by the CFO.”
“In the last eighteen months, we have been looking at Indian companies which are now more product based and we want them to grow by operating in emerging markets like the Middle East and Africa,” said Jai Das.