Intel Capital made its first investment in India in 1998. Since then, it has invested over $320 million in more than 80 companies across 10 cities in India. Sudheer Kuppam, an engineer turned venture capitalist, is the Managing Director of Intel - Asia Pacific. He hopes venture deals will pick up this year as valuations will be more reasonable. Kuppam spoke to Taslima Khan on April 2, and talked about where the remaining money in the currently operational $250 million fund will go in 2013.
Q. How was 2012 with respect to deals?
A. Our investments in India halved to six in 2012 compared to 17 in 2011. But globally, we were on the (same) pace as 2011. Other than macro situations, one of the main reasons (for fewer deals in India) was lesser syndication (co-investment) possibilities in India compared to globally. Also, there was a lot of frothiness in the market, which crept into the valuations. I believe the slowdown is a good thing, because it brings in balance. This year we will see deals picking up and valuations getting more reasonable.
Q. How does Intel Capital go about deal sourcing?
A. Deal sourcing happens in multiple ways at Intel capital. In the last two years we have done a dozen new deals. There are multiple avenues. For example, we got to know of Hungama through one of our own business units, Intel India, which had been working with Hungama. Althea Systems (an online video technology start-up) was introduced to me by a friend at Silicon Valley. Saankhya Labs (a fabless semiconductor company) was sourced by our investment manager on his own. Networking brings us most deals. Venture capital is a relationship business. If you are not a networker you cannot survive in this business.
Q. Where do you do most of your deals in India?
A. We have invested in 10 plus cities in India. In the last few years, we have sourced more early-stage deals in Bangalore and mid- to late-stage deals in Delhi and Mumbai.
Q. Your favourite sectors this year...
A. Cloud computing, where we are more interested in cloud infrastructure than in software as a service. India doesn't have enough cloud startups as far as the infrastructure side is concerned . We need accelerated cloud adoption in India, which is not happening. Out of our own 35 to 40 companies, very few are using the cloud. Payments is another interesting area. Companies that have the technology to convert cash payments into cards will be good for us.
Q. How are your ecommerce companies Fashion and You, Deals and You doing?
A. Honestly, this space is getting too crowded. There is too much competition. Lack of sufficient infrastructure is also inhibiting their growth. We expect some of that to change because a lot of ecommerce companies have been funded in last two years and they have invested in infrastructure, especially logistics. These companies need to scale very quickly, because there is no room for more than two to three market leaders. This year you might see more consolidation in ecommerce.
Q. Are you looking at fresh deals in ecommerce?
A. With respect to portfolio companies, we will put in more money only if we think new money will generate more returns for us. They have to make a case that new money can generate more money. We will also see how they used the earlier capital. As far as new investments are concerned, we look for companies that actually executed well with the previous round of capital raised. Were they capital efficient? What is their value proposition? What is their differentiator? Are they in a position to command space for themselves in this market?
For companies in our portfolio that are not doing well, we will try to explore an avenue for exit. Most VCs will stay away from brand new, non-funded companies.