Indian entrepreneurs drawn to corporate VC – AVCJ Forum

“We're a $30 million fund, and people used to ask why are you not writing $50 million per check, when the group has access to significant amounts of capital,” said Gaurav Sachdeva, managing partner at JSW Ventures, the venture arm of JSW Group that launched in 2015. “Why not look at iron ore, and why not look at steel processes. It took us time to establish that we are a technology fund, and what we do is very different than what the parent group does.”

Investors may also face concerns over how their motivations tie with those of their corporate backers. Pankaj Makkar, managing director at Bertelsmann India Investments, recalled that when the firm was founded in 2013 many entrepreneurs thought its purpose was to pursue buyouts on behalf of Bertelsmann. It took several years for most of the ecosystem to understand that the GP wanted to help innovative technology companies, not swallow them up.

However, once a corporate VC investor has established a presence in the market, entrepreneurs can find considerable upside in partnering with them. Though these units might not be able to tap the resources of their parent directly, they are able to connect their portfolio companies with firsthand expertise in a way that is still difficult for many pure VC players.

“There's a lot of positive wealth that we end up creating within the ecosystem, with the entrepreneurs, and they like that a lot,” said Makkar. “Some of the large funds in India now have operating partners and so on, but they are often treated as second-class citizens. If you're not making deals you are not the most exciting person in the fund.”

While helping portfolio companies through these resources, corporate VC investors must also be willing to remind entrepreneurs that their end goals differ from those of their parents. Rather than as mere portals to deep corporate pockets, founders and management teams must understand that their investors have financial obligations to meet and as a result expect certain levels of performance.

“What's worked in our favor is actually being as divorced as possible from headquarters,” said Adit Swarup, a principal at Rakuten Ventures. “When we do want to engage with our parent to have our start-ups work with our parent's digital assets, then it's on a case by case basis, and it's purely based on a meritocracy. So we've taken a conscious approach to distancing ourselves and making sure that all of the liability and the successes for the financial performance rests purely with us.”

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