Artiman Ventures eyes more India investments from fourth fund: Ajit Singh

Joseph Rai – VCCircle.com – Thursday, June 23, 2016 – 13:50 IST – Artiman Ventures, a Silicon Valley-based early-stage venture fund, is currently investing from its fourth fund of about $300 million that closed last year. In an interview with VCCircle, Ajit Singh, partner, said the investments from its latest fund in India are likely to be higher than from the previous funds. He also explained why Artiman has been investing in just about 10-15 companies despite being an early-stage fund with a fund size of about $150-300 million and why it stays in its portfolio companies for 10 years. Excerpts:

What do you mean when you say Artiman invests in ‘white space companies’?

We should try and explain white space using a few attributes. Firstly, it means that we are frequently the first investor—a first mover in a new space. Secondly, it is a space where a company is at the intersection of multiple markets or technologies or both. Thirdly, the way to describe a white space is a large market which has not seen innovation in a long time. Finally, if I can choose one phrase to capture a common theme among white space companies, it is disruptive innovation.

Which geographical regions have you invested in?

It so happens that most of our investments are in Silicon Valley and India in the ratio of approximately 70:30. We have a total portfolio of more than 30 companies.

How many companies does Artiman plan to invest in India from the fourth fund?

We have total assets under management of just over $1 billion, and we are currently investing out of our fourth fund. Despite being an early-stage fund, we typically invest in not more than 10-15 companies from a fund. Hence, ours is a fairly concentrated portfolio. The type of companies we invest in is innovation driven which take a longer time to build out. As a consequence, they also take more capital. If a company is doing well, it is a bad idea to starve it or look for funding elsewhere. We have made five investments from the forth fund of which two are in India. The number of companies based in India that we invest out of our most recent fund is likely to be higher compared with our earlier funds. 

Who are the investors in the fourth fund?

The investors are a combination of retirement funds, endowments and HNIs, among others.

Can you tell us about the last three funds and the investments they made in India?

Our funds are between $150 million and $250 million. Our investments in India have been steadily growing over the years. Further, many of our US investments have had significant operations in India. For instance, BioImagene, a company in the cancer diagnostics space that we invested in 2006 had software development as well as clinical development teams in Pune and Bangalore. The company was acquired by Roche. More recently, over the past three years, we have invested in OncoStem Diagnostics, CORE Diagnostics, Tonbo Imaging and medECUBE – all have their headquarters in India. Finally, mSupply, our most recent investment in India is quickly becoming the de-facto destination for construction related products and services. We are currently in active talks with several Indian companies but nothing is finalised yet.

Which space do these companies belong to?

The companies are in the artificial intelligence (AI), biotech and financial technology space.

What is the typical ticket size?

We are an early stage VC firm. We usually come in at Series A or even in seed stage. At the seed stage, we invest $500,000 to $2 million. If it is Series A, we put in anywhere between $3 million and $8 million. Over the life of a company, we invest many times more than that. What is most important is that we almost always invest in later stage rounds of our companies. That is a natural corollary of us making a few investments, which are disruptive and usually take a longer time to build out. We also have a growth equity fund, from which we invest in our companies that are in a high growth phase.

How does the exit pipeline look like?

We easily stay in a company for 10 years. But this is not something dogmatic. If there is a good strategic fit for an acquirer, say, in three-four years, and the valuation is appropriate, we are perfectly okay with the company getting acquired. Our guiding principle is that companies are never sold but they are bought. We are developing them for a long haul. If you ask whether there are companies which are significantly or reasonably mature in our portfolio, we have half a dozen such assets.

What is the exit mode for Artiman?

In general, if you look at our assets they are split between the fund exiting via the IPO mode in one-third of the companies and two-thirds via acquisitions. Obviously this could change.

What is your take on valuations of companies in India?

Our view is if we rank our companies, there are firms that have unique science, technology and service. There are companies that probably have all of that. I listed them in that order because that is typically the order of valuation. Good science, if successful, is a great value driver; good technology, if successful, is a good value driver too though less than science; and good service is also a value driver, if successful, though often less than the other two. The more science heavy a company is, the higher value driver it is. If you look at the valuation of our companies, it is between a few tens of millions and over $1 billion. Most of these companies started at around $5 million in investment.

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