Sequoia to invest more in product firms

Venture capital (VC) firm Sequoia Capital, which on Tuesday announced an investment of Rs 60 crore in Quick Heal Technologies, a provider of computer security software products, is looking to step up investments in product-based companies.

This is the second such investment this year, after the company put money into Druva Software.

“India has always been strong on the services side, but a shift is taking place from services to products. And, over the last two to three years, we have seen a dramatic increase in the number product companies. The quality of business ideas on the product side has certainly improved and I think for the next few years, this will be an interesting space,” said Sequoia Capital Managing Director Sumir Chadha.

Over the last two years, the venture capital firm has invested Rs 500-600 crore in 10 technology companies in India covering products as well as services. “While it is difficult to give an exact number on the new investments, we will look at product firms in India this year,” said Chadha.

He believes it’s also about an eco-system, which is now developing in India. “We already have a good talent base of engineers in India. Add to this, most development centres of multinational companies do high-end work. Also, investment systems like the India Angel Network and the Mumbai Angel Network, which is still developing, are helping this trend. Moreover, for the first time, we have a thriving domestic market,” said Chadha.

Around a decade ago, Sequoia was one of the earliest VC firms to enter the domestic market. At present, it is investing from two funds. It raised $725 million (Rs 3,382.13 crore) Sequoia Capital India Growth Fund-II in 2008 to invest in late stage, pre-IPO and public market firms. It also has a $300 million (Rs 1,399.5 crore) venture fund, which was raised in 2007 and invests in start-ups and early stage companies. The investment in Quick Heal is from this fund.

Quick Heal will use this investment for growing its product portfolio, expand global distribution footprint and acquisitions. The company registered revenues of more than Rs 100 crore in 2009-10, all from its indigenously developed product portfolio.