The Hindu Business Line : No option but to scale up

Helion Venture Capital has been one of the most active venture funds in recent times, most recently leading a $10-million series financing of Kirusa, a mobile value-added services (VAS) provider, along with Nexus India Capital.

In less than a year, it has closed some 10 deals and deployed much of the $140 million raised, notably in equity research firm Amba Research, Anantara Solutions and Komli, which provides online advertising solutions.

Founded by two former entrepreneurs, it is focused on backing tech-powered companies. Speaking to eWorld, Sanjeev Aggarwal, Managing Director, shared insights into the fund’s investment philosophy. Excerpts:

What prompted Helion to invest in companies such as Anantara and Komli?

Every investment is driven by different parameters. In the case of Anantara, our belief is that big businesses have already established themselves in the conventional IT services areas. To break into the market, one needs to have a distinct business model.

Anantara’s business model is unique in the fact that there is no linearity between the growth in business and people. Also, the team at Anantara is on par with any other “IT services major.” It played a seminal role in building the consulting and enterprise solutions business of a prominent Indian IT giant to $200-million billing in 2007.

In the case of Komli, the attraction was growth of Internet advertising in India combined with a team that understands how the space has evolved in the US. This combination allows them to create interesting variations that are unique to India and then extend the offerings to the US. An additional attraction is that the Komli team has deep technical skills and business skills – a necessary combination for creating a leading Internet company.

How does Helion make a difference to these companies, apart from funding? What gaps do you fill, what pain points do you remove?

One of the key roles of venture capitalists is to help entrepreneurs move to the next orbit. As members on the boards of our portfolio companies, we do not attempt to run the company but focus on providing operating freedom to the team.

Depending on the requirement for the company, we provide guidance and assistance to our portfolio companies in areas such as scaling up, where we assist in identifying structural gaps within the company and redrawing the organisational blueprint, thus indicating a clear roadmap for scaling up.

Leadership recruitment is another area where we help. For instance, IT product companies — which are typically created by teams of entrepreneurs who are technology focused — might need a CEO who is business focused. In such as scenario, our role would be to help identify such gaps in the management team and help in recruiting appropriate talent for those positions.

We also chip in with advice on strategy, helping address questions such as how to navigate growth, is the time right to look at globalising operations, is there a need/opportunity to get into new lines of business and whether the company needs to focus on core competencies and get out of non-core areas. By the very nature of our job, we look at multiple business plans and teams — including meeting competitors of our portfolio companies. Due to this, we are also in a position to identify synergistic targets for inorganic growth, structuring the deals and help the entrepreneurs/CEOs think through the process. Taking the inorganic route as a way to bulking up revenues is not good use of money, but if one is looking at the route to enter new markets or new service lines, it is a good option.

What is Helion’s usual exit plan?

Helion’s fund life is for 12 years. We do not look at exiting a company per se, but rather focus on the means to the end, i.e., focus on building value. And when this is the case, exit takes care of itself, where either the co mpany is acquired or it goes public.

Is Helion actively looking to invest in product-focused and OPD companies?

We will continue to see a flow of back office operations being offshored to India. Currently, India has only single-digit market share in this area.

At the same time, no other country has the advantage of a wide universe of an educated population. Having said that, businesses where revenue growth is not linear with people are an interesting investment option. We are constantly looking at product companies to invest in. For instance, we have invested in Zmanda, which offers proven and cost-effective open source backup and recovery solutions.

What have been the takeaways from your Daksh experience?

Daksh was a company that went through a rapid growth phase (of almost 100 per cent CAGR). Having been a part of such a momentous growth gave me a keen insight into managing growth while ensuring that the business stays on track.

One of the prime reasons for Daksh becoming a global leader was its world-class executive team.

My Daksh experience now comes into play in assisting portfolio companies attract high-quality talent. Also, the stint inculcated a keen sense of judging people, which helps in making decisions on which entrepreneur to back.

How insistent is Helion that funded companies scale up?

At Helion, we are in the business of backing companies that have the potential to scale up. In today’s environment, scaling up is not an option. High growth helps in creating higher shareholder value. Companies that operate on a larger scale can attract better customers and employees. Everyone wants to be associated with a leader.

Why is Helion partial to companies powered by technology?

Technology enablement drives scale in a non-linear way and increases efficiency. Hence, businesses powered by technology deliver better return on capital employed (ROCE). It is a fact that there are not enough pure-play technology product companies in India. Also, the consumption of technology in India is a minuscule percentage of the GDP. Hence, the opportunity is very large.

dmurali@thehindu.co.in

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