'Deal flow in tech sector is weak'

Q&A: Sudheer Kuppam,Intel Capital MD (India, Japan, Australasia and South-East Asia)

Since Intel Cap commenced its operations in India in 1998, it has invested in 60 firms and has exited around 20 companies. The maximum number of exits were recorded last year. Managing Director (India, Japan, Australasia and South-East Asia) Sudheer Kuppam speaks about the prospects for the year 2010.

What do you think of the fund-raising scenario next year?
In many situations, limited partners (LP) have pulled back and are hesitant to participate in new funds. Intel Capital has been fortunate in that matter, since it does not have to depend on LP relationships. We invest entirely from Intel Corporation’s balance sheet.

Where are valuations heading and what will be the deal sizes?
We are a stage agnostic investor, which means we invest in companies from pre-revenue to pre-IPO, as well as PIPEs. We do not have deal-size limits on either end of the spectrum. We will continue to evaluate companies on their merit and by the risks they represent. For the past one year, particularly outside the US, VCs have shied away from the riskier early-stage deals, preferring investments at the later stages. I don’t see this changing anytime soon. Valuations are somewhat benchmarked to equity valuations, which have gone up this year. Overall, valuations have come down from the level reached in 2008 and 2007.

In India, VCs have been a bit biased towards the technology sector. Do you see this changing and why?
Historically, the technology sector is the most active space for VCs. However, for the amount of funds active in India at present, the deal flow within the technology sector is low. Hence, VCs are actively looking at other opportunities in the non-technology sectors.