SAP plans venture investments in India

NEXT BIG THING/ It could do an Intel on the Indian IT technology eco-system

SAP, the global business software solutions major, has announced its intention to start investing in Indian technology companies, in the manner of Intel, in an effort to build an ecosystem of new technologies and applications.

This move by the German major is expected to significantly add to the capabilities of the Indian IT industry. It will benefit from SAP's acumen in identifying opportunities and extending its expertise to bring to market the solutions critical to the industry.

Speaking to Business Standard in Bangalore recently, Peter Zencke, member of the executive board, SAP AG said: "We are exploring the Indian IT industry to start investing. We have looked into a couple of companies in India and we should be finalising our investments this fiscal."

SAP's decision to invest in India comes at a juncture when Indian IT companies are seeking to step up their global presence and also bring world-class products to the marketplace.

SAP Ventures, globally, has been investing in companies that offer exciting new technologies and applications. With its years of experience it draws on a network of powerful business relationships to help entrepreneurs and management teams recruit the best people, make the right technology decisions, win new business and build their own partner networks.

SAP Ventures has a track record of investing in technologies like sensor networks to go with RFID, virtual data centre, Linux management, security, SAP NetWeaver and SAP xApps-related technologies, grid/utility computing, knowledge management, domain specific analytics, BPO, service-oriented architectures, retail applications and analytics engines.

According to SAP, it invests selectively in emerging technology that combines large market potential with high growth opportunity.

With a venture capital partnership model and the autonomy to pursue investment areas not immediately connected with SAP's core business, SAP Ventures has globally invested in over 50 direct equity deals, building a credible track record.

The company adds that it never leads investments but always follows and prefers the lead to be a new investor.

"Our typical initial investment size is $1-3 million with allocations for future investment, should the company require it. While we do not take board-of-director or supervisory board seats, we do require observer rights at the board level and we are an active investor at this level. We are a corporate investor, but our methodology is much more aligned to traditional venture capital investors."

SAP Ventures is interested typically in expansion-stage opportunities, which is companies with core management teams in place, a product/technology that is customer ready, applications that are validated by early customer involvement, and finally, "some revenue traction".

So SAP Ventures is not an angel investor but one that comes in at the second level. It will typically look at companies which have not only established proof of concept in terms of their product offering but also some sign of business viability on the horizon.

SAP Ventures currently has geographical focus on the United States and Europe and has companies such as Commerce One, Red Had and WebEx among its portfolio companies. It has low exposure in the Asia-pacific region.