Ven­ture cap­i­tal ex­its jump 56pc to $2.77b in 2017


This year saw In­dian ven­ture cap­i­tal () funds reap ex­its worth around $2.775 bil­lion across 56 deals, a sharp 56.2% jump from the $1.777 mil­lion ven­ture cap­i­tal firms gained from 74 ex­its last year, data from pri­vate deal tracker Ven­ture In­tel­li­gence shows.

The year wit­nessed big ex­its such as Tiger Global Man­age­ment's $800 mil­lion part-exit from In­dia's largest on­line re­tailer Flip­kart when it sold shares to Ja­pa­nese tele­com and in­ter­net con­glom­er­ate SoftBank Group Corp.

Tiger Global scored an­other $500 mil­lion exit in ride-hail­ing com­pany Ola, again sell­ing its shares to SoftBank.

"The ven­ture cap­i­tal en­vi­ron­ment is pretty good. Ear­lier ex­its used to be a chal­lenge but now mul­ti­ple modes of ex­its have come in. Early-stage in­vestors have made sig­nif­i­cant re­turns. Ex­its would help peo­ple in­vest even more," said Har­ish H.V., part­ner at Grant Thorn­ton In­dia.

Oth­ers that scored ma­jor ex­its in 2017 in­clude Paytm owner One97 Com­mu­ni­ca­tions Ltd's in­vestors Re­liance Cap­i­tal, Saama Cap­i­tal and Sap­phire Ven­tures, which sold shares worth $250 mil­lion to the com­pany's ex­ist­ing in­vestor Alibaba Group Hold­ing Ltd and its pay­ments arm Ant Fi­nan­cial in March 2017.

"We were for­tu­nate to be an early in­vestor in Paytm and had tremen­dous faith in Vi­jay and his team," said Ash Li­lani, man­ag­ing di­rec­tor and co-founder, Saama Cap­i­tal, re­fer­ring to Paytm founder Vi­jay Shekhar Sharma.

"We were with the com­pany through their jour­ney and our de­ci­sion to stay with the com­pany for long was based on the founder's long-term vi­sion and the mar­ket op­por­tu­nity which was huge in the case of Paytm." For early in­vestors like Saama Cap­i­tal, hold­ing on to its in­vest­ment in One97 for close to seven years meant a re­turn of al­most 75 times the cap­i­tal that it in­vested in the start-up in 2011, ac­cord­ing to Ven­ture In­tel­li­gence data.

"We had sev­eral op­por­tu­ni­ties ear­lier to sell our stake in Paytm but we held off as we are pa­tient in­vestors and had a longterm per­spec­tive and wanted to wait for the right tim­ing. De­spite our One97 stake sale, we con­tinue to be­lieve in the Paytm vi­sion and have re­mained as in­vestors in Paytm Mall and I con­tinue to be on the Paytm Bank board so the re­la­tion­ship con­tin­ues," said Li­lani. Ac­cord­ing to Li­lani, while pric­ing and tim­ing are crit­i­cal for ex­its, there is no ex­act science to ex­it­ing a start-up in­vest­ment.

"There is no ex­act science be­hind ex­it­ing a com­pany. You have to de­ter­mine the tim­ing and price that makes sense for your fund. One im­por­tant fac­tor is mak­ing sure it is done in a very trans­par­ent way with the com­pany's man­age­ment team and that you sell to some­one that they are com­fort­able with and will be good for the com­pany be­yond you," he said.

How­ever, even as the value of ven­ture cap­i­tal ex­its in­creased sig­nif­i­cantly, the growth was on the back of a few large deals and one par­tic­u­lar buyer-SoftBank.

The three largest ven­ture cap­i­tal ex­its this year came on ac­count of SoftBank writ­ing large cheques to ac­quire sec­ondary shares from ex­ist­ing in­vestors.

Ac­cord­ing to Karan Sharma, di­rec­tor and co-head, dig­i­tal and tech­nol­ogy in­vest­ment bank­ing, Aven­dus Cap­i­tal, while SoftBank has been a ma­jor in­vestor, the mar­ket is also see­ing sev­eral other in­vestors that want to ac­quire sec­ondary shares in strong dig­i­tal and tech­nol­ogy com­pa­nies. "I don't think SoftBank is a ma­jor exit gate­way for the in­vestors. Sec­ondary stakes are gen­er­ally bought by pri­vate eq­uity in­vestors in com­pa­nies that are demon­strat­ing mar­ket lead­er­ship or those who have al­ready demon­strated or have ei­ther be­come prof­itable or are likely to be­come soon.

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