Specialised PE funds like us can recreate Silicon Valley

Written by P P Thimmaya | Updated: Jun 21 2014, 07:37am hrs
Exfinity, the private equity (PE) fund promoted by four IT industry veterans, TV Mohandas Pai, Deepak Ghaisas, Girish Paranjpe and V Balakrishnan, which recently raised R100 crore to invest in Indian tech start-ups, is planning a new offshore fund for similar opportunities overseas. In an interview with PP Thimmaya, former Infosys CFO and board member

V Balakrishnan says the new fund will invest in companies focused on new technologies, such as cloud and mobility, and it will help them scale up fast. Excerpts:

What kind of companies will Exfinity invest in

It is the business-to-business (B2B) segment where all the innovation is happening today. Business-to-consumer (B2C) is getting more crowded and commoditised. We are focusing on high-end, niche technologies, mainly in new areas like cloud and mobility, where it can solve business issues, both in India and globally. It should also result in creation of an IP or product. If you look at Indias IT industry, it is $100 billion and purely services based, but the next $100 billion is going to come from new technologies. So you need to create IP and products if you have to be relevant in the IT industry.

Large companies are not investing in IT innovation. In the US, there is an ecosystem. There are a lot of IP companies that become a feeder for larger companies. In India, that kind of ecosystem is missing. We e are trying to invest in such companies and create an ecosystem so that larger companies can also benefit at some point.

Any plans of an overseas fund

This is the first time we have created a PE fund. Normally, when you start a new fund, you start small and create a track record. Then, you go and raise a large fund.Now we are seriously thinking about the next fund. Maybe an offshore fund, which is larger and invests in the same ecosystem. We would like to invest in India and overseas. Even in the current fund, we want to invest up to 10% in companies outside India. If we have an offshore fund, we will have more flexibility investing both in India and abroad. It will be bigger and can be a $100-million fund.

How different are you from

PE players

If you look at the founder members of Exfinity, all four are from large IT companies. They have seen the changes in technologies and know how to scale up. Today, you need to mentor the youngsters, help them to connect and scale up.

The four of us know a thing or two about the industry, about financing. If we can mentor youngsters, it will make a huge differentiation in the marketplace.

What do you think of Indias entrepreneurial ecosystem

It is nicely building up. In Bangalore alone, close to 1,000 start-ups come up every year. If you look at IITs and IIMs, 20% of them (students) do not want to join any company. Even families are becoming supportive. If specialised PE funds like ourselves come into the system, something like Silicon Valley can be created.

At what stage would you look

at investing

It will mainly be in pre-series so that we come in at the right time, handhold the promoters, help them scale up, get them connected and make them grow faster. We want to invest in companies that have good ideas, can show proof of concept and earn some revenues. We are looking at a ticket size R5-10 crore. The fund is a five-year one. We

will invest in companies that have good upside.

The funds promoters largely have a services background. How will you be able to add value

All of us have worked in large companies that have seen technology changes. In 1991, there was a shift from mainframes to client servicing, and then the Y2k revolution came. Now it is all about cloud, mobility and others. We know where technology is headed.