Helion Venture Partners, a $ 350-million, India-focussed, early-to-mid stage venture fund, invests in technology powered and consumer services businesses in sectors such as outsourcing, Internet, mobile, technology and products, retail services, education and financial services.

Mr Kanwaljit Singh, Senior Managing Director, Helion Advisors Pvt Ltd, in this recent interview in his Bangalore office, talks about the venture investment scenario in the country and Helion's plans. Excerpts from the interview:

Could you give us an idea of Helion's plans?

Helion has been investing in India for the last five years. We started out with a focus on tech-powered businesses. We said we would be venture investors, typically early-, mid-stage businesses, less than $10 million of total investing in a company and India as the focus – both domestic market and provider of global solutions. When we raised the second fund in 2008, we expanded to include consumer services. Broadly that is how we are operating now – technology and technology-powered businesses, consumer services. We look at Internet, mobile, and outsourcing on the technology side. On the consumer side, education, retail services, financial services and healthcare. We have about 35 investments. The first fund is fully invested and the second, 60-65 per cent.

At the beginning of the year, you said 2010 was a pick up year and you expected it to continue this year. Do you still hold that view?

I think so. The momentum seems to be positive. A few things which are driving the optimism and of course certain questions, which are more global economic questions. In the late 1990s, early 2000 there was one wave of venture (capital). Because of the global meltdown, Internet bubble all of that happened, so venture was at ebb. During 2005-07, half a dozen funds got started, including us, Nexus and IDG. That cycle is coming a full circle. We are seeing more exits and more stability as far as the venture model is concerned. That has been a positive, lot of companies have been talking about going IPO. The whole exit momentum is building up, which is important. Some of the themes we have been focussing on have continued to grow in terms of opportunity. We saw the emergence of the e-commerce space. It wasn't as if it didn't exist earlier, but the momentum and the excitement has been much more in the last 12 months or so. That gives us hope that there are enough opportunities to invest. There is growing evidence and momentum on the potential exit side of things. All in all, they seem to be positive indicators.

Of course, some of the concerns about the global economic slowdown and the stock markets have been under pressure especially internationally. That is more a question mark than a concern at this stage. Given the stability of India's overall economic growth we don't see the impact of that at least at this point of time affecting our business and the whole environment of entrepreneurship and start-ups. That continues to be strong and we are seeing a lot of new businesses coming up across all sectors.

With the stock market being what it is, wouldn't exit options get limited?

Interestingly, while we are seeing the fluctuation in the stock market, if you see some of the more recent IPOs, especially of VC-funded companies, a company called Tree House, Jubilant Foods and Lovable Lingerie, there still seems to be a strong desire for financial institutions to support some of these emerging businesses. We have had a few planned IPOs put back, waiting for stability in the market. That is more a function of the swings in the market than the fundamental proposition not working or not being meaningful. There is a temporary caution mode, but fundamentally I don't think it has changed both the belief and the ability of some of the businesses. The optimism is still high, although in the last few months there has been a more cautious note.

Most of the activity has been in the Internet space. Mobile still seems to be at a nascent stage…

We do have a few mobile investments. On mobile, we are seeing the ecosystem getting established. Data access or Internet access on mobile has gone up significantly. Some figures show that Internet on mobile is higher than Internet on PC or computer systems. That is an attractive trend. In the last five years, the telcos were holding on to significant portions of revenue for data services and the VAS business was getting choked by the telcos saying we want 70-80 per cent revenue share. That was a hindrance to the growth of entrepreneurial activity around the mobile. We have heard about equitable revenue share now.

Mobile as a platform for commerce has been on the anvil for a while as much as the Internet has been. The challenges were that payment systems and the ecosystem were not fully developed.

The RBI made it mandatory for OTP (One Time Password). This means the banking system has to be recalibrated. OTP is issued by the bank, issuing bank of the credit card. That means that it cannot be a single point of verification which today a Visa or a MasterCard can provide. The companies have to tie up with every bank or some intermediary appears who does the integration. We have one of our companies called ngpay in mobile commerce. Suddenly, it saw a dead-end situation. Fortunately, they have managed to talk to half a dozen issuing banks and overcome the problem. Some of these things have reflected in a slower pick up for data services and Internet on mobile. The belief that mobile will be a significant player in future is still high.

How does the pipeline look for Helion? Some of the funds that were looking at growth stage are now looking at early stage also.

Our headline belief is that there is still not enough money in venture. We think there is capacity for more. Less than $500 million of money gets invested in venture every year. And for an economy of our size, this is not even a drop in the ocean. We believe that if there is more money available, more entrepreneurship will happen. It is not as if the number of investment opportunities is small that if there are too many players or if other players come in, we will see a pipeline conflict. We believe that the entrepreneurial ecosystem is relatively young – 10-15 years. The cycles have only happened one or two rounds. Therefore, the investment community needs to work more together than against each other.

We are big believers in syndication. Almost 80 per cent of our deals are syndicated. Which means we will bring in another co-investor. The idea being that there are two brains around the table, can add value, there are two potential sources of funding, company needs more money, you have somebody alongside you, and in a lot of cases, we have re-invested in the same company between the two existing investors. You don't have to go out for the next round. You put in some money, take it to the next level and probably get more money from outside. I would certainly say it is welcome if more people want to come in and do it because we know what our value proposition is. A lot of US VCs are showing renewed interest in India. In 2008-09, because of the slowdown we had seen some shrinkage in that numbers.

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