J.P. Morgan buys Canaan's India portfolio

The sale comes after US-headquartered Canaan decided to shutter its India operations. It also follows a similar transaction involving Kleiner Perkins Caufeild & Byers (KPCB) and Sherpalo Ventures' India joint venture, although in that case the existing team initiated the deal and raised additional capital.

Promoters of four Canaan portfolio companies - Matrimony.com, Indiaproperty.com, Cartrade.com and Happiest Minds Technologies - confirmed to The Economic Times that J.P. Morgan would be coming on board as an investor.

Canaan, which closed its 10th fund last October at $675 million, made its first India investment in 2006, committing $8.65 million to Matrimony.com alongside Yahoo. AVCJ Research has records of at least 24 investments across 15 companies in total.

In addition to the four companies mentioned previously, the current portfolio includes: mobile advertising business AdNear, microcredit provider Equitas, incentives program operator Loylty Rewards, mobile value added services provider mCarbon, Naaptol Online Shopping, technology support business iYogi, spot TV network SureWaves, and legal process outsourcing firm UnitedLex.

While information portal Chakpak was sold to Flipkart in 2011, it is understood that careers network techTribe and digital broadcaster Cellcast Asia were both write-offs.

Several members of the Canaan India team have already departed, with Rahul Khanna setting up venture debt firm Trifecta Capital and Alok Mittal planning his own start-up.

The Canaan transaction involves the sale of a portfolio of investments from a larger fund, not a restructuring of the fund itself. With KPCB and Sherpalo, the LPs were replaced by secondaries specialists and the portfolio was spun out into a new entity. At the same time, the existing team formed their own firm - Lightbox - and raised $100 million from a separate group of LPs for new investments.

Anecdotal evidence suggests there is no shortage of zombie funds in India; the manager has lost interest, perhaps recognizing there will be no successor vehicle, and the LPs want to get out. There are also GPs that want to remain in business and need replacement LPs to help reinvigorate a portfolio. However, secondary transactions are difficult to execute, largely due to differences over price.

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• Topics
• Secondaries
• South Asia
• Venture
• Canaan Partners
• Venture
• Secondaries
• J.P.Morgan Asset Management
• India