Source: www.livemint.com
Experts say because of changing risk profiles, there may be a shift away from earlier stage to later stage investing
Bangalore: In the face of a global meltdown, some venture capital firms are planning to shift from early stage start-ups to backing companies that have been around for some years and need capital to push growth.
“There may happen a shift away from earlier stage investing to later stage safer investments simply because of shifting risk profiles,” says Mohanjit Jolly, executive director, Draper Fisher Jurvetson India Advisory Services Pvt. Ltd (DFJ). The firm, which started as a pure early stage technology focused fund in India, has now decided to take decisions on a case-to-case basis.
This would be a repetition of what happened between 1999 and 2001, when the fortunes of dot-com firms, whose basis of valuation was eyeballs rather than revenues, nosedived and several Indian investors such as ICICI Venture and ChrysCapital (then Chrysalis Capital) moved away from funding early stage companies.
Mumbai-based Matrix Partners India says the stage shift will be visible in the number of deals in the near future. “There will be a decrease in the number of deals in early stage, while the deal flow in growth investment is actually improving,” says co-founder and managing director Rishi Navani, adding that as risk aversion is rampant currently, growth equity will appear safer.
Developers such as Unitech, Peninsula Land, HDIL and Future Capital, the financial services arm of the Future Group, are in talks with investors including some leading private equity funds for raising investments for their projects, after the collapse of Lehman Brothers, whose third party fund, Lehman Brothers Real Estate Partners had committed an investment of over $ 1 billion to these companies. Even the private equity players are equally upbeat about property investments. Mr. Bharath Banka, Chief Executive of Aditya Birla group's private equity division, "The current credit crisis, which is expected to continue for a few more months, opens up avenue for private equity firms to make large investments in the real estate sector. Long term returns will be higher in real estate for investments made during this point of economic cycle."For more view- realtydigest.blogspot.com