U.S.-based VC to fund $375 Million in Indian firms

Mumbai: To focus on emerging markets, U.S.-based venture capital (VC) fund New Enterprise Associates (NEA), which raised $2.5 billion (11,425 crore) in its 13th fund, will allocate 15 percent, or $375 million, for investment in Indian firms. The India portion of the fund will be invested over a period of four years, with a deal size of $30-80 million, reports Mint.

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"Our sweet spot will be the mid-market segment," Bala Deshpande, Senior Managing Director told Mint. The new fund will also restructure its alliances in India. NEA-IndoUS Ventures - the early- to mid-stage VC fund that NEA had partly sponsored - will now be known as IndoUS, she said.

"Though (in India) we will be doing growth equity deals only, in some sectors we may enter early and do follow-on funding till we reach $50 million," said Bala, who is the first Indian to become a general partner of the 31-year-old fund. NEA-IndoUS, started in 2006 by Vinod Dham, Vani Kola and Kumar Shiralagi, when NEA had no direct presence in India, raised $189 million in 2007 and has invested in firms such as mobile phone marketer mGinger, movie rental service Seventymm Services, and online gift service Myntra Designs.

The services sector and the clean technology space are among sectors the company will invest in. "A whole lot of emerging services will come into play which were not attractive earlier just because they were not organized," said Bala. In India, NEA has so far invested in Delhi-based RT Outsourcing Services, a reverse logistics company that moves products from the consumer to the manufacturer for reuse or disposal, and more recently in financial software and systems, which provides systems integration services and software to the banking sector.

"Even funds with a good track record have found it difficult to raise money with many trying to raise funds since the past one year," said Jagannadham Thunuguntla, Equity Head at Delhi-based investment bank SMC Capitals. "It is not good news for first-time fund managers. However, for the ones who have managed to raise money and invest in 2009-2010 they will get fair valuations and can at least expect modest returns."