The recent crash in the stock market, among a host of other things, has made the life of people managing venture capital (VC) and private equity (PE) funds a lot easier. Companies, which till recently had the option to either get VC funding or tap the primary market directly, are now finding the second route nearly closed.
And a resultant effect is that top VCs are again being pursued by companies looking for funds, top officials at VC-PE funds said. This is a welcome change from the days when some of the VCs even went to companies to convince them to take funds from them.
Till about January this year, VC and PE funds almost had to make companies understand that there was greater value in taking money from them than tapping the capital market directly. But the irrational valuations that the market gave to all and sundry made a number of entrepreneurs greedy.
They preferred to tap the investors at large than get funds from VCs and remain under strict vigil about the usage of funds and also performance. Not any more.
The sensex is down over 25% from its January high of 21,207 and the activities in the primary market has almost come to a trickle, if has not stopped completely.
From 16 public offers that closed in January and February combined, there were just three in March and just one that closed in April.
Some of the high-profile and irrationally priced issues also had to be withdrawn after opening for subscription.
On the side of the venture capital-private equity funding, some of those who were not under any pressure to invest in a hurry, had substantially cut down their activities in the market.
For example, Temasek, a Singapore government arm and one of the most sought after PE funds in India, had hardly done only deal since April 2007.
Source: Times of India