Venetia Kontogouris is senior managing director at Trident Capital’s U.S. office and currently serves on the board of several investee companies including DepotPoint, Elucido, Infotrieve, Microland and Odyssey Logistics & Technologies. Prior to joining Trident Capital, she spent over 16 years at Dun and Bradstreet Corporation and related entities including Cognizant Technology Solutions (Cognizant) where she was senior vice-president, venture development. Kontogouris represented Cognizant in the Information Partners Capital Fund formed by Dun & Bradstreet and Bain Capital. As part of her role, she led the successful spin-off and initial public offering of Cognizant and served on the board for several years.
Recently, while traveling in India, she caught up with S. Prem Kumar of The Smart CEO to talk about venture capital investments in the country and the role of an investor in a growth company.
What is your biggest challenge while investing in a growth company in India? What are you, primarily, worried about when you write the cheque?
I believe, in the initial stages, finding customers for a new product/service is always a challenge in India because local firms are often reluctant to work with young companies. As an investor, we need to backup the founders and probably handhold them to get the first few clients. Sometimes, we see great ideas coming out of strong engineering teams. In such cases, we go out with them for sales calls in the early-phase.
In addition to this, not only in India, but also around the world, we make sure the financial books are clean. There is a very diligent process we go through to ensure this.
Trident invests across sectors and in companies in various stages of growth. What kind of analysis and due diligence do you do before investing in a company? Operationally, from your perspective, wouldn’t Trident be able to add more value to a company at an earlier stage?
We do significant analysis of the potential market and on the background of the founders. For young companies, the financial analysis is important to determine what the required investment will be in order to achieve breakeven. We are able to add value at all stages, depending on the needs of the company.
In the venture capital/private equity world, as investors, we certainly need to part with our time and help entrepreneurs with our knowledge and advice. You have to become a part of the entrepreneurial team in the early-phase. Your value addition has to be so good, the entrepreneurs should come back to you and say, let us start another business together.
What attracts a limited partner to a private equity fund that invests in India? Is it pretty much the macro-India growth story or is there more to it?
Mostly it is in order to tap into the perceived faster growth in emerging markets for business services, consumer goods and advertising, among others. It is also attractive for diversification.
The two big advantages in an economy likes India’s are talent and the size of the domestic market. Across fields from engineering to finance, there is a lot of talent available. It is a lot of work as an investor, but we do not mind since the opportunities are tremendous.
I have been part of the India story long before India became famous. I have seen developments for over 21 years and through Cognizant have seen first-hand, the growth of India.
How does India’s policy environment affect your investment plans?
Recent political developments regarding tax and other investment limitations always make it a challenge to invest in an India-based company rather than elsewhere. As a result, I think, it negatively impacts valuations in certain sectors.
Having said that, for good entrepreneurs who are ready to maintain fiscal discipline and run companies with very good governance, you are ready to pay a good price.
Trident does not have an India-focused investment team to carry out its investments in the country. Wouldn’t it make sense to put-together an India-focused team that understands the local market better?
Most of our investments do not focus on the Indian market alone and therefore a local team is not essential. In addition, many of the founders have already worked in the U.S., so there is little cultural advantage in having a local team. Plus, everyone in India understands the U.S. approach to investing.
What are your favourite sectors in the Indian market and why?
Education, wireless and Internet-related businesses, among other sectors are areas we are excited about. Each of these sectors capitalise on the rapid economic growth and growth in middle class income and demand. In the Internet space, we need to have a little more patience to grow businesses. The opportunity is phenomenal with several young people less than 25 years of age getting online. In the education space, shortage of teachers is a problem. The role of technology in the sector is gaining popularity. Overall, these are sectors where we believe the consumption market is large enough and growing.
In general, what are some aspects you would like to inculcate into Indian entrepreneurs in the country?
Sometimes, I feel, entrepreneurs in India are less willing to share negative developments and challenges affecting their business and therefore it may be too late for management and investors to work together to take remedial action. The other aspect, which I believe needs to be inculcated, is to encourage entrepreneurs to build a global company with one culture across the world. Again, in a company like Cognizant, this worked brilliantly.
But, overall, we are happy with the entrepreneurs we have worked with and the Indian investments we have made till date.
Is the amount of capital and the opportunities to invest in India balanced or is there too much capital chasing too few opportunities?
I think the amount of capital is just about right. There would be more capital available if there were better exit opportunities.
At a broad level, the ecosystem needs to evolve a little more. Success brings more success. We have seen that in the information technology and software space. A few more success stories across sectors will certainly increase the number of investment opportunities.
Any specific future investment plans in India?
We are constantly looking for good entrepreneurs. Sometimes, we do not make any investments in a year in India or even in the U.S. if we have not found the right entrepreneur we want to back.