Over the last two years, leading funds such as Lightspeed, Accel, and Matrix Partners India have sought out professionals with investment banking expertise.
“Venture firms are logically arriving at the next step in their evolution,” said Anuj Bhargava, managing director of Lightspeed, who was previously managing director at Deutsche Bank. “As portfolio companies reach maturity, the crucial question becomes: how do we monetise and harvest these investments? It is imperative to not only exit but to do so strategically—at the right time and in the most effective manner. The opportunities to exit are significantly more limited and fleeting compared to the opportunities to buy.”
Matrix Partners India hired Vijay Pillai, with experience in investment banking at ICICI Securities and o3 Capital, in January this year, according to his LinkedIn profile. Accel recruited former UBS executive director Alok Bathija as partner and head of corporate development in May 2022. Bhargava was hired by Lightspeed in November 2021.
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Early-stage venture firm Chiratae Ventures hired Amish Dedhia, former VP of investment banking at Yes Bank and former director at PwC, in March 2022. Peak XV, formerly known as Sequoia Capital India, expanded its strategic development team focusing on exits to seven members by adding one person over the last year.
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Those hired into senior executive positions are tasked with overseeing and helping portfolio companies with follow-on financing, mergers and acquisitions, handling secondary market transactions, and navigating startups toward their initial public offerings (IPOs).
ETtechElaborating on his responsibilities, Bhargava mentioned his recent work to find “industrial logic” connecting two portfolio companies—one based in Mumbai and another in Southeast Asia. He aimed to convince the founders that merging entities would result in a stronger unified entity.
“By merging, you eliminate significant expenses and fast-track the journey towards public listing for the amalgamated firm, promising a sooner exit opportunity for all parties involved. However, while these strategies might seem straightforward on paper, their execution presents considerable challenges,” he remarked, shedding light on the intricacies of such processes.
As the Indian venture capital ecosystem matures, returning capital to limited partners has become crucial for VCs looking to raise subsequent funds. VCs are sitting on an estimated Rs 15,000–20,000 crore of secondaries, according to a report in news platform The Ken.
In the past, one of the major criticisms or concerns raised by certain investors regarding India has been the lack of exit liquidity opportunities.
“I call this DPI (distributed to paid-in capital) realisation for VCs,” a senior executive at a top-tier fund in India said on condition of anonymity.
DPI measures the ratio of cash distributions that investors have received from a VC to the total capital they initially invested in the fund, the person explained.
“Limited partners want to see a real dollar return; paper money and gross IRR no longer cut it,” the executive said. “I think as more VCs or early-stage investors head back to raise the next fund, LPs are going to say if you send dollars back to us, we will send it back to your new fund. The one-way street is over.”
Overall funding in Indian startups plunged almost 70% on year in 2023 amid global macroeconomic headwinds, conflicts, and inflationary pressures.
As of December 15, 2023, Indian new-age companies had picked up just $7.5 billion worth of capital across all stages compared with $24.3 billion in 2022, data from Venture Intelligence shows.
Professionals in these roles often serve as observers on the investment committee (IC) that ultimately decides whether or not to invest in a startup.
“One of the lenses that I bring to ICs is whether this company would raise a follow-on round. Would it have a path to a successful exit?” Bhargava said.
