VCs zero in on enterprise software space

Helion, Intel Capital lead the pack by investing in three companies each

Last year, multi-stage venture capital (VC) fund Helion brought on board Alok Goel, the former chief operating officer of technology major SAP India, to spearhead its investments in the enterprise software space. The move was unusual at a time when a lion's share of VC investments in the country were flowing into consumer technology companies in segments such as e-commerce, mobile applications, and internet.

Enterprise software means software developed particularly for the needs of an organisation or a business house rather than for individual users.

Over the past years, Helion, which has about $600 million under management, has invested in three start-ups in the enterprise software space. The investments include workspace-as-a-service solutions provider Workspot ($6.5 million), security software company Seclore Technology ($6 million), and Pune-based language management software start-up LinguaNext (undisclosed amount).

"We have a renewed focus on the enterprise side as we are seeing quite a few companies from India that are addressing global markets for enterprise software and we are bullish on that trend," Ritesh Banglani, partner at Helion Advisors, told Business Standard.

Helion is not alone. The rising interest in the Indian enterprise software space is also visible in the fact three of the five recent investments made by Intel Capital, the investment arm of US-based chip-maker Intel Corporation, are in this segment.

The main reason for this increased focus on enterprise software, according to experts, is the rising business traction for Indian enterprise software companies, without the need for much investment on-site.

With the internet boom, Indian business-to-business software companies are now capable of getting and delivering to global clients without being physically present at clients' locations. Additionally, with several established success stories in this space now, the confidence of global customers in Indian enterprise software has strengthened.

"With the advent of cloud computing, teams that have successfully built products for multinational companies in India are now venturing on their own and talent moving out of information technology services into product-oriented companies makes for a bullish investment case," said Bhavanipratap Rana, investment director at Intel Capital.

"We are looking to invest in product companies involved in security, internet of things, machine language, data centre automation/management software, analytics and software defined storage," Rana added.

The three enterprise software companies that Intel recently invested in are Bangalore-based Vizury ($16 million), NxtGen Datacenter & Cloud Technologies ($8.8 million ), and Perpetuuiti TechnoSoft (undisclosed amount).

India saw 29 merger and acquisition (M&A) deals in the enterprise software space in 2013, and 31 such deals in 2012, according to Indian Technology Product M&A Industry Monitor Report, published earlier this year by software industry think-tank iSpirt in partnership advisory boutique firm Signal Hill.

The report noted the combined value of M&As in the enterprise software space was at $171 million in 2013 compared with $143 million in 2012.

"Investment in e-commerce and internet continues to grab a lion's share of the venture capital and private equity investment dollars. However, dollars invested in the enterprise software companies are showing an upward trend," the report said.