Google brings in PE subsidiary to capitalise on Indian startup boom

Google is set­ting up its growth cap­i­tal arm in India to dou­ble down on start­up invest­ing as it turns bull­ish on fast-grow­ing local emerg­ing com­pa­nies that have drawn atten­tion from big investors across the world.

Google Cap­i­tal will hire a team and invest in growth-stage com­pa­nies in India, a mar­ket in which investors rang­ing from Japan­ese com­mu­ni­ca­tions group Soft­Bank to Chi­nese ecom­merce giant Aliba­ba have recent­ly made big bets. “It made a lot of sense to focus a lot of atten­tion here now, “David Lawee, part­ner at Google Cap­i­tal told ETin an exclu­sive interview.

In the next 3–7 years, near­ly 30% of the world’s bil­lion-dol­lar com­pa­nies will be from India, Lawee pre­dict­ed. Indi­a’s start­up ecosys­tem has become increas­ing­ly attrac­tive for a spec­trum of investors from large hedge funds to cor­po­rate ven­ture cap­i­tal arms as com­pa­nies such as Flip­kart and Paytm notch up hun­dreds of mil­lions of dol­lars in fund­ing at mul­ti-bil­lion-dol­lar valuations.

Eight-year-old Flip­kart was val­ued at over $11 bil­lion (Rs 67,000 crore) in its lat­est fund­ing round last year while Chi­na’s Aliba­ba has ear­marked $575 mil­lion to invest in four-year-old mobile com­merce play­er Paytm. While Google Cap­i­tal, found­ed in 2013, has invest­ed near­ly $500 mil­lion in 11 com­pa­nies glob­al­ly, India will be its first des­ti­na­tion where it has an office out­side the US.

The Cal­i­for­nia-based com­pa­ny also invests in ear­ly-stage com­pa­nies through Google Ven­tures. “The com­pa­nies that I’m see­ing here have much more upside than most com­pa­nies I’m see­ing in the US,” said Lawee.

Lawee-led Google cap­i­tal team camp­ing here

A ser­i­al entre­pre­neur, Lawee counts the move to set up office in India as “the most impor­tant” deci­sion Google Cap­i­tal has made in recent months. Google Cap­i­tal invest­ed in Chen­nai-based cus­tomer sup­port tool mak­er Freshdesk in June 2014 and Ban­ga­lore-based online retail estate start­up Com­mon­floor in Jan­u­ary 2015. Lawee and his team from Google Cap­i­tal have been in India for less than a week now and have met near­ly 25 star­tups and poten­tial can­di­dates who can head the oper­a­tions in India. Over the past three days, Lawee and his team have inter­viewed near­ly 100 can­di­dates for the job. “My ambi­tions are much high­er than the amount of mon­ey I have,” said Lawee, who is look­ing to diver­si­fy the Google Cap­i­tal portfolio.

He did not dis­close the amount of mon­ey Google Cap­i­tal will invest. “I want to invest up to the lim­it of what’s rea­son­able,” said Lawee, who was the head of cor­po­rate devel­op­ment at Google until 2012. Google set up the growth equi­ty arm in 2013 and has invest­ed near­ly $500 mil­lion in 11 com­pa­nies so far. This year it is hop­ing to invest anoth­er $300 million.

“India is set to over­take Chi­na as the world’s fastest-grow­ing big econ­o­my. So the returns are much high­er than any oth­er mar­ket,” said Deep­ak Kaushik, the founder & CEO of man­age­ment con­sult­ing firm Finaks Advi­so­ry Ser­vices. The firm main­ly works with star­tups. “The entre­pre­neur­ial boom and dense tech tal­ent are cre­at­ing many big oppor­tu­ni­ties,” said Kaushik.

As a result of Google’s entry, oth­er lead­ing investors will fol­low suit, said Girish Math­ru­bootham, the CEO & founder of Google Cap­i­tal-fund­ed Freshdesk. The growth equi­ty arm of Google will also rope in Googlers to work with its port­fo­lio companies.

Near­ly 400 Google employ­ees worked with its port­fo­lio com­pa­nies last quar­ter, said Lawee. The fund will also help com­pa­nies plan their mar­ket­ing, infor­ma­tion secu­ri­ty, human rela­tions and oth­er func­tions. “The Google brand adds a lot of cred­i­bil­i­ty and opens many doors. They also bring a lot of exper­tise,” said Mathrubootham.

Source: Eco­nom­ic Times