In the past year, about half a dozen such firms, including Four Cross Media, BitChemy Ventures and Ant Farm, have launched this model in India and are running about two to three ventures each. Many in the industry say the model was first popularised by German incubation firm Rocket Internet, which owns and operates online fashion portal Jabong and restaurant delivery website Foodpanda .
“We’ve seen venture capital copying the US investment model in India. But it takes far longer to scale companies here, and the exits aren’t like what we see there as well,” said Puneet Johar, 41, cofounder of Four Cross Media.
Founded in 2010 by Sanjeev Gupta and Johar, alumni of multinationals such as Unilever, Coca-Cola and Reebok, Singapore-based Four Cross Media has incubated four ventures in India, including America Swan, an online private-label fashion brand, and digital servicice company To The New. . “We will do one or two launches every year,” said Johar, whose firm is backed by Malaysian cross-media operator Astro Overseas, and invests $5- $10 million (Rs 31 crore to Rs 62 crore) in each company. These investors typically own a majority stake in their portfolio companies and look to exit within three years of inception.
Model getting acceptance in India
In contrast, seed-stage investors have a much longer locking period, ranging from five to seven years. “This model forces you to have a very sharp focus and very deep domain knowledge. Also, you can’t look to incubate 20 companies, because that won’t work here,” said Sharad Sharma, cofounder of software product think-tank, iSpirt.
Rishi Khiani, 39, founder and chief executive of Ant Farm, said his firm looks at a space only when there is a recognised opportunity. “Then we look to “Then we look to better what’s already on offer,” he said.
Launched in 2012, Mumbai-based Ant Farm terms itself as an “innovation sandbox,” and is backed by a host of wealthy investors such as Sanjay Kalra, the former chief executive of Tech Mahindra.