It’s the season of stealth for venture capital (VC) and private equity (PE) firms. A host of PEs and VCs have gone into a ‘private’ mode and are keeping new investments under wraps. Firms such as Nexus India Capital, Bessemer Venture Partners (BVP), Kotak Private Equity, Matrix Partners and Sequoia have chosen to be discreet about some of their investments.
Nexus India Capital, which recently announced a $100-million fund, has officially announced only three of its six completed deals. Similarly, Bessemer Venture Partners, which recently earmarked $350 million out of its newly-raised $1 billion fund, has announced just 50% of its deals in India.
Industry watchers estimate the value of such deals could be more than $500 million and will only grow with time. Interestingly, even Anil Ambani refused to share the list of his PE investors in the recent Reliance Telecom Infrastructure (RTIL) deal.
Some investee companies deliberately choose to hide their investments because costs, such as real estate, go up, as people jack up prices expecting the companies to be loaded with cash. Also, some VCs and PE funds insist on keeping deals under wraps because new entrants flush with dollars approach companies and lure them with much higher valuations for the next round of funding, thus creating an awkward situation for the original fund managers.
The firms want to lie low in some cases for strategic reasons too, especially when they feel it is in the best interest of the company. “We are not looking for publicity, we will announce the deals when it is best for the business of the company,” explains Nexus managing director Naren Gupta. Firms say they often leave the decision to decide when they want to go public with the news with the investee companies.
“We usually defer to our portfolio company’s management teams, usually the marketing teams, to decide when to announce the investment. Most times, the management team may wish to only announce the investment at a time that best suits their business strategy.
Our job is to stand behind our management teams, not in front of them. So, we let them decide,” says BVP managing director Rob Chandra. The investee companies usually like to go public when they are hiring senior employees or pursuing a large customer. It gives a sense of comfort to the new employees and also the customers that a big name is backing the startup.
It’s largely the VCs, that have been hush about deals, but some PE funds too have followed the keep-mum policy. For example, Kotak Private Equity has not announced two recent deals worth $17 million. “It’s the investment and fund performance that matters to us and our investors.
We have never felt any need to make noise about our investments,” says Kotak Private Equity CEO Nitin Deshmukh. One important consequence of the rising stealth deals is that various investment numbers being proffered by research houses are proven wrong because most of them track numbers from published sources and the growing number of unannounced deals will push the actual investment figures higher than the recorded figures.
Source: Economic Times