Mike Moritz, Partner, Sequoia Capital and Managing Director, Sequoia Capital India, Sumir Chadha talk about the what investments they have made and in which Indian businesses, and also what do they see for the future of private equity participation in India. 

Chadha told CNBC-TV18, "I think the growth in equity business has a lot of potential in India and we have investments in Idea Cellular, Café Coffee Day, KMC Constructions, so we believe that there is a lot of potential. We are investing in large companies across sectors, Idea Cellular is a great example, we have invested USD 45 million and we expect to see ourselves doing those types of deals a lot more, over the coming twelve months."

Excerpts from an interview given to CNBC-TV18

Q: It is a boom 2.O as they are calling it in Silicon Valley, it seems that those heavy days are back again, do you seem some of that rubbing off on India as well?

Moritz: Undoubtedly, the business is booming both here in India where we are now operating and also in China where Sequioa Capital is operating, which is new for us over the course of the last five years.

Q: You saw Google, you saw Yahoo, some people are calling this bubble 2.O even before it has begun. Is that a good sign and we won’t get hit as hard as we were in the past?

Moritz: Maybe that is a gleam of recognition but I think there are still going to be a lot of victims this time around as well.

Q: Sequioa as a venture capital firm is not doing just providing seed fund at an early stage. You guys are doing investment in companies like Idea, possibly even at a late stage. So, what is the difference between your VC firm and a private equity firm anymore?

Moritz: We have got a very big thrust in India, China and the United States on investing in the growth equity phases of interesting and the best private companies, even if they are of considerable size and removed a little bit from the venture business. But there is a very big difference between the business that we conduct and what you pitch as private equity or leverage buyout. We almost never ever use that.

Our holding periods are extremely long. We buy equity and we want to be partner shareholders, side by side participants with the founders, the entrepreneurs and the management teams who are building the businesses, so that we have a very long term views of these businesses.  

Q: Is India the right ground for such investments because we have quite a few companies, which are older than two-three years, but still not mature by western definition?

Chadha: Absolutely, I think the growth in equity business has a lot of potential in India and we have investments in Idea Cellular, Café Coffee Day, KMC Constructions, so we believe that there is a lot of potential. We are investing in large companies across sectors, Idea Cellular is a great example, we have invested USD 45 million and we expect to see ourselves doing those types of deals a lot more, over the coming twelve months.

Q: You have recently invested in Mingle Box, a social networking site. You are also invested in Fropper.com. One way of saying is that nobody knows what is going to work in social networking, so let us get in every side possible. The other way of looking at it is that there can be differences even in social networking sites?

Chadha: No, we have been very active and early investors in internet in India, we are investors in Shaadi.com, which has Fropper.com as one of its sites. We are also investors in mingle box, we are also investors in travelguru, guruji.com. So, we have been very active investors across that sector. We do not back competitors, so we look at these properties even that they may appear from the outside to be competitive - they have very different focuses, very different user bases and we are seeing a lot of growth in that sector.    

Q: E-commerce has begun the first dotcom boom, this time media seems to be getting a lot of attention but you see hope for the youtubes of the world, having India avatars as well?

Moritz: The media business played very well during the first phase of the internet as well and I think the large media companies that ignored the internet in 1995 are really paying the cost of doing that, now.

Q: One like Dow Jones for example?

Moritz: Dow Jones is one of them but there are a lot of old time companies whose managements had their heads in the sand - by ignoring the internet. As broadband proliferates in India and mobile telephony expands, internet-based media companies are going to be much more of a force in this country as well.

Q: Advertising on the internet has changed ever since Google introduced its revolutionary technology. In India though, advertisers are still looking at banner ads and slightly more traditional methods. Do you still see some time specially among your client companies till advertisers figure out how to do this whole internet thing?

Chadha: No, in fact today if you talk to a lot of people in the internet business including our companies - the problem is the opposite, the advertisers are fighting over the immediate amount of inventory and today there are not enough web pages. So, the real problem in the internet today is lack of connections and lack of users and we really need to see the government push some major regulations in terms of broadband reforms to get that going. But advertisers are very excited about internet in India today. In fact, a lot of our companies are seeing very strong ad sales and we expect that to continue.

Q: Any numbers on the kind of funds that Sequioa sees coming into India and China, both from itself and maybe from other firms in this space in general?

Moritz: Sequioa Capital has a billion dollars committed to invest in India and a billion dollars committed to invest in China, which are obviously very substantial commitments and we are just very focused on making sure we make really good investments here and elsewhere, and won’t worry about what competitors are up to. We are just focused on our own work.

Q: Silicon Valley may still be the capital of the internet business, Bangalore of course is emerging as possibly the BPO capital of the world. You have investments in companies like Firstsource, Customer 24*7, do you see that space as just scratching the surface right now or might other countries improve their competitiveness and catch up with India?

Moritz: I think there is a whole second wave of companies in which Sequioa Capital in India is an investor. GlobalLogic Aplabs, marketRx and a variety of others, that will be a second wave of these companies that perhaps people are not too familiar with today. But as they emerge, as they become public companies, people will understand how deeply rooted this BPO business is in India and how it is spreading beyond the original practitioners of the craft.