Why global fund bosses start out on their own

Limited partners back investment professionals with good track record

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After being at the helm of Intel Capital's investments in India and the Asia-Pacific region for 15 years, Sudheer Kuppam decided to launch a new fund under his own firm - Epsilon Venture Partners - last month. With this, Kuppam has joined the club of global fund heads who are turning entrepreneurial by launching their own funds.

"There are no regional tech VC (venture capital) funds in Asia-Pacific. Epsilon fills that void and offers a unique value proposition to the investors and entrepreneurs," said Kuppam over phone from the US, where he has already hit the road to raise $400 million for his maiden fund. He is confident of having the first close in the next six months.

Epsilon is a regional VC and growth equity fund that will invest in the entire Asia-Pacific (except China) with a tech focus.

"Epsilon is the fifth Greek alphabet. Hence, we will have five partners in total. (We) will be hiring down the road as we get nearer to the first close," said Kuppam.

Last year, Heramb Hajarnavis, then head of India private equity business at KKR, moved on to start SeaLink Capital Partners. The year also saw Amol Jain, managing director at TPG Capital India, partnering with Rajeev Gupta, former head of India buy-out team at Carlyle, to launch Arpwood Capital. Earlier, Manish Kejriwal, former India head of Temasek Holdings, had moved out to launch his own venture Kedaara Capital.

"You do not start your own fund solely because it is thrilling to be an entrepreneur," said Jain, co-founder, at Arpwood Capital. "The fundamental rationale is usually to serve a gap in the market, which is either unaddressed or you have a strong belief that you have a sustainable edge in that segment because of your experience."

The others in this growing club include Ash Lilani, former president of India and China market at Silicon Valley Bank, who moved out to start Saama Capital; Sandeep Murthy, who moved out of Sherpalo Ventures to set up Lightbox Ventures; and Ajay Relan, former chief executive of Citigroup Venture Capital India, who founded CX Partners.

"Two-third of LPs (limited partners) we spoke to believe they are missing out on the local flavour, especially the ability to operate across asset classes and deal sizes when warranted by unique Indian situations," said Toshan Tamhane, partner and co-leader (private equity practice) at McKinsey in India.

"Many of the global funds have an implicit threshold of $100 million ticket size for investment and then at the other end, you have VCs who make sub $25-million investments. Hence, there is unfulfilled need for investing in $25-100 million ticket size," said Tamhane.

Being part of a global investments platform, one learns a lot about deal evaluation, operations, and the role of human capital thanks to the experience of the founders who have overseen investments across cycles, industries and geographies. These are all learnings that one gains by being a part of these leading global funds. So when they start on their own, this experience comes handy.

"Some of the LPs have been quite comfortable being anchor investors for investment professionals with a good track record," Tamhane added.