Norwest Venture Partners is a global venture capital firm. MD Sohil Chand is focused on making growth equity investments in Indian companies across a wide range of sectors, including telecom, technology, financial services, infrastructure and manufacturing.

In view of the current economic slowdown, how have you reworked your investment strategy?
I don’t think there has been any particular change in our investment strategy. We have always been very conservative and focused on extracting value, and that is something we are continuing to do. The slowdown has uncovered compelling opportunities at good prices. So are looking more actively in this environment than we have over the last year.

We are sector agnostic. So we focus on all sectors, with the exception of real estate and commodity. We can invest in anything and everything and that continues to be the focus. We will evaluate deals across sectors that are most attractive for us.

-- Sohil Chand Managing Director, Norwest Venture Partners India (NVP India)

Are you still actively pursuing investments or are you on hold?
Of course, we are actively pursuing investments. Sure. But business plans is not our priority necessarily. We are also investing in companies that are up and running. We are looking proactively at the secondary market.

What are your investee companies doing in the current scenario?
Our investee companies are doing very well. They haven’t really been that impacted with the slowdown. Obviously they have been careful about spending money, they are trying to conserve cash but it’s business as usual for all of them.

One of your portfolio companies is Yatra, the travel portal. The tourism sector has been hit badly. You mentioned that all your portfolio forms are doing well. Is Yatra doing well too?
I am not able to comment on specific companies. In general, the portfolio is doing very well. I can’t go into the specifics of each company as a matter of policy.

Are you looking at re-capitalizing your investee companies? If yes, what is the approach? What are the criterion and benchmarks? If not, why?
No, not to my knowledge. Our companies are doing well. If they need more funds we will consider supporting them.

What is the minimum ticket size of your investments?
There is no minimum. All the later-stage deals, which is where we are focusing, have a minimum ticket size of US$ 15 million.

What kind of returns do you think are realistic when we talk of VC investments?
I don’t think there are realistic returns per se. It is a mix, depending all upon risk and return, and the relationship between the two. If you are doing a deal that is relatively protected, then you can get a low return. If it is a deal where you are taking a huge amount of risk, obviously you want a higher return. So it depends on the stage. In general, it is fair to assume that for early-stage companies, the more early they are, the higher the return expectations would be, as opposed to relatively later-stage established companies. The other thing is, for structured deals return expectations would be lower than for straight equity deals. So we don’t have a benchmark that we look at the rate of return tradeoff.

How much time do you stay invested?
All this is very stage dependent. Early-stage could be seven to eight years and later-stage could be three to five years.

Have you exited in India as of yet? What exit strategy do you have?
We haven’t exited in India so far. We have a relatively nascent portfolio. Exit would typically be through an initial public offering (IPO). We may sell something in the IPO and then may look to the secondary market.

What’s the fund size? How much money do you have with you to invest?
A lot of this is not publicly disclosed. We have been investing from a US $650 million fund, which is a global fund. We don’t have any specific allocations for India. We are looking to deploy money both in India and around the world.

What do you look at before you decide to make investments?
We don’t focus on entrepreneurs. That is something we could look to do. We spend a lot of time on growth investments of established companies. We look to give them growth equity. We look at the same things in all our deals. That is, we want to see a great management team. We want to see a business that is highly scalable. We want to see a financial model that can give the returns that we would expect and we would want to understand the risks as to what can go wrong and what we can do to de-risk the business.

How do you think the current slowdown will affect the entrepreneurial ecosystem?
Entrepreneurship continues despite the slowdown. Those who have ideas, they continue to develop those ideas. I don’t think the slowdown has anything to do with their ability to come up with new ideas.

How closely are you involved with your investee companies?
It depends on the stage of the company. In early-stage companies we are closely involved. We typically take board seats, we help them with key strategic decisions. In later-stage companies we are obviously less involved. We may take a board seat or may not.

There is a perception that when investors come on board they try to call the shots. How do you allay such fears?
Entrepreneurs need to be realistic. They want somebody to put in US $10 to 15 million and that somebody else is going to take a significant stake. The investor wants a return on his capital too and he wants to make sure that everything is going right. So you need to look at in the context. If it is a startup company, investors would certainly be involved. They have stake in those companies. They should be involved. In a later-stage company, you find investor involvement is less, so the company has already grown to a critical size. You are giving money as growth capital. So in this case, there is perhaps less interaction with the investors.

I don’t think involvement of investors is a bad thing at all. The investors ultimately are trying to make money for themselves if you make money for the entrepreneur. It is not as if the investor has a different return profile from the entrepreneur. Everybody is working on the same thing to make the company as successful as possible.

What are some of the challenges that you face in your role at NVP?
I think the biggest challenge is the huge volume of deal source. Sifting through the deals and deciding on which ones to spend time on and which ones to do is the biggest challenge right now. We are in a deployment mode and there is just a huge number of opportunities. [We are] figuring out which sector one should focus on, what specific companies one should focus on. There is a huge amount of opportunities out there and you can just get lost in it.

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written by Mr. Supriya Dutta, February 03, 2010

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Warm Regards,
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(M) +919874545880,
E-Mail:- duttasupriyo@yahoo.com

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