Intel Cap shows VC taps still open

Economic slowdown or not, venture capital investments are showing no signs of fatigue. The latest to announce a mega investment is Intel Capital, the investments arm of chipmaker Intel, which will pump $23 million (Rs 110 crore) in three technology-enabled companies in India.

The three are telecom software and services firm One97 Communications, online business-to-business portal Indiamart.com and a vocational training institute Global Talent Track.

While everyone is talking about the merits of investing in a depressed market, venture capital (VC) firms seem to be the one walking the talk. Sudheer Kuppam, the managing director (India) at Intel Capital, said, “We are getting much more for every dollar spent. I expect markets to recover well enough in the future for us to exit with our expected returns.”

Last year, Intel invested $17 million in three other Indian firms, including Yatra.com, social networking portal BuzzInTown.com, and the out-of-home (OOH) advertising firm Emnet Samsara Media. Kuppam said that the company has a time horizon of 3-7 years to exit its investments in the firms through public listing, sale or merger. So far, Intel Capital has invested in 60 technology companies in the country and has used about 40% of its funds marked for India.

“In 2009, we are targeting many more companies as we are getting good deals from the valuations perspective. We have already invested several hundreds of millions dollars,” Kuppam said.

“You can get good quality deals now,” added Kanwaljit Singh, partner with Helion Venture Partners, which is a co-investor in Global Talent Track. Singh felt valuations have become more reasonable.

He expects Helion to close another 4-6 deals this year, against the average run-rate of 7-8 deals annually in the last two and a half years. “It must also be said that there is a lag effect and the full impact of the current slowdown may not be seen in the last quarter (of FY09). Usually, deals take about 4-6 months to implement,” Singh added.

Interestingly, most investments seem to be going into the online space. “Initially, my investor was hesitant,” said Vinu Jacob, a Delhi-based media professional who found an investor for his media website after a search of just two months. But the low entry costs and fixed investments, together with the relatively short gestation period and revenue visibility, helped him convince the investor.

“Basically, we need about Rs 15 lakh per month and I have a team that can ensure an X number of page views from day one. If you have decent page views, thanks to tools like Google Adwords, generating ad revenues is not a problem,” Jacob said.

Priyanka, co-founder of Hungrybangalore.com, an online food ordering business, said, “We got funding from Indian Angel Network in August and the valuations were reasonable back then. But with people curtailing their spending now, a consumer-facing business trying to raise money may find it more difficult to get attractive valuations.”