We have to be prudent in making investments

'We have to be prudent in making investments'

Trident Capital Fund says India would continue to offer interesting opportunities

Sanjeev Ramachandran

Wednesday, October 14, 2009

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Venetia Kontogouris, managing director, Trident Capital

THIRUVANANTHAPURAM, INDIA: With over $1.6 billion of capital under management, including $400 million raised in its most recent fund, Trident Capital Fund VI, a unit of US-based Trident Capital, is at the moment looking at the interesting opportunities thrown up by India.

In an exclusive interview to CIOL, Venetia Kontogouris, managing director, Trident Capital, talks about the current VC scenario and the company’s focus on growth opportunities in the software, payments and the outsourcing space.

Let us begin with venture capital in the time of recession. What is the current mindset?

The business environment is slowly getting better but it is still a challenge for young companies to generate revenues. As a result, most VCs are being more conservative.

Are VCs impacted by the global recession or is there still hope left for the near future?

Business has definitely improved over the past six months, and certain segments such as security and wireless are doing quite well.

A recent report had said that VCs are more attuned to the global economy. How do you explain that?

The recent financial crisis has made everyone much more aware that no country operates in isolation. In addition, even young companies have an international growth or outsourcing strategy from the beginning.

The current economic scenario seems to be witnessing venture capitalists make adjustments in their investment strategies. Is this actually true?

Since many investors would like more liquidity in the VC investments, more attention is being paid to exit strategy

Are VCs moving away from any particular sectors and focusing more on newer areas for funding? For instance. it is being said that certain segments such as telecom are not anymore on the VC radar, while clean tech is prominently there. If so, could you explain such a phenomenon?

A: Our firm has never focused on the “investment du jour” so we largely bypassed the Internet bubble in 2000 and the telecom bubble more recently. That being said, the economy always grows around certain governmental and societal initiatives, and so clean tech will definitely provide growth for the economy on a long-term basis, but is unlikely to provide the quick and stellar returns of past bubbles.

In a scenario where the general belief is that lower valuations could present opportunities for VCs looking for good deals, are venture capital firms really spending?

Since existing portfolio companies are also impacted by the slowing economy, more funds need to be set aside for follow up funding for these companies when appropriate, and so there is less available for new deals. In addition, there is generally less money being put into venture funds, so VC must be more selective in making new investments.

What is the current Indian scene when it comes to venture capital? Does India still offer interest?

There are always interesting opportunities in India, but it will take time for the economy to develop and for young companies to start generating returns and liquidity for their investors; so generally many VCs are taking their time in making new investments there.

What new possibility does India offer? How does the Indian scenario compare with China?

Since the India consumer is somewhat lagging the pace of adoption of new technologies, there are still many opportunities here that have been proven successful in other countries. China generally has moved faster in adopting new technology.

What does Trident Capital foresee in the next five years down the line for India as well as globally?

With its fast-growing economy and young population, India will continue to offer interesting opportunities in many areas. The key will be political stability as well as continued favorable tax treatment for offshore investors and infrastructure development.

The list of Trident’s Indian portfolio companies is in fact impressive. What do you see doing next?

I believe there are opportunities in the wireless and payments areas.

Does Trident believe that the current recession offers a great opportunity and it is the time to invest? Why?

Our minimum focus now is on working with our existing portfolio companies and making sure that they are successful in moving into new ventures. The recovery this time will be much longer than in prior recessions and therefore we will need more prudence and patience in making new investments.

What would you consider as your current focus area in India?

We are in the process of raising a new fund and are continuing to make investments in our target areas. We remain focused on growth opportunities in the software, payments and the outsourcing space.

©CIOL Bureau

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