Saif Partners | Betting big on tech revolution

The firm has scored 20 full and partial exits, returned close to $200 million to limited partners (investors in venture capital—VC—funds) in 2013-2014 and multiplied its money four times—not too shabby for a market where VC returns are usually benchmarked at 2.5 times or 2.8 times the original investment.

Largely a technology-focused fund, several of SAIF’s portfolio firms are among some of India’s most valuable start-ups. These include online travel firm MakeMyTrip, local search platform Just Dial Ltd and mobile commerce platform Paytm. Overall, the firm deployed close to Rs.900 crore ($135.6 million) across 17 investments during 2014. SAIF now has 50 active investments, including 17 made in 2015.

SAIF Partners initially started out as Softbank Asia Infrastructure Fund in 2001 with a $400 million fund in which US networking giant Cisco Systems Inc. was the sole limited partner and Japan’s Softbank Group was the general partner.

The fund’s mandate from the start was to invest in technology companies in Asia, including India, Africa, South Korea and China. In India, the firm’s early investments included Intelligroup, Sify Technologies and IL&FS Investsmart. As the fund started performing well both in India and China, the general partners or fund managers came out and founded SAIF Partners around late 2004.

SAIF Partners went on to raise a $600 million fund and the investment thesis was no different—it continued to focus on multiple geographies and sectors, and was largely stage-agnostic. It was from this fund that SAIF made growth and early-stage investments in companies such as MakeMyTrip and Just Dial, which later went on to list on the public market. SAIF only partially exited its stakes through initial public offerings and continues to retain some stock in both companies.

Saif PartnersHQ: Gurgaon Launch (India): 2004 Fund under management (India): $700 million Companies funded (India): 50 Unicorns: Paytm Select exits: MakeMyTrip, Just Dial

After the success of the 2004 fund, which generated over 4X (four times the original fund corpus) returns, the firm raised its biggest fund ever in 2006. The new $1.2 billion fund decided to bet big on the technology revolution that was ready to transform developing countries. “That is when we diversified our investor base…there was no change in focus but since it was a large fund, we started diversifying sectors with respect to growth equity and listed firms,” says Deepak Gaur, managing director at SAIF Partners, who has been with the firm for nine years.

The fund lasted till 2010.

In early 2011, the India team, including Ravi Adusumalli, Gaur, Vishal Sood and Vivek Mathur, raised a dedicated fund for India called SAIF Partners India. The $350 million fund (technically, SAIF Partners’ fourth) was now focused only on the home country and its buzzing start-up ecosystem. It has three investment strategies—growth-stage venture capital, early-stage investments largely around technology firms and listed companies. “There are some sectors which do not have unlisted companies that you can invest in. In such cases, we buy listed stocks but our investment horizon or the time period of holding remains five to seven years,” says Gaur.

While the fund has largely been driven by technology-focused investments, it has also invested in offline consumer brands. These include Manpasand Beverages and quick-service restaurant chain Ammi’s Biryani. One of its big early stage bets is Paytm. When SAIF invested in Paytm, owned by Noida-based One97 Communications Pvt. Ltd, the company was focused only on providing value-added services to telecom companies. Today, the Alibaba Group-backed Paytm not just holds a payments bank licence but is also fulfilling SAIF’s dream of being a part of India’s e-commerce revolution.

It does have some regrets. One of them is losing out on the opportunity to invest in e-commerce marketplace Flipkart and taxi aggregator Ola, both valued at over $1 billion now. “We wish we were a part of these companies…we didn’t invest in the early stage rounds and very quickly most of these businesses had become reasonably late stage. In hindsight, we should have done it,” says Gaur. There have also been a couple of investments that didn’t work. It has written off its investments in Chennai-based Asian Health and Nutri Food Ltd and kids retailer Catmoss Retail after both failed to manage costs, scaling too fast.

After tasting success from some of its early-stage investments that later on went public, SAIF decided to start making investments as small as $200,000-500,000. During 2011-2012, it expanded its team significantly and had three to five people focused on seed-stage funding. The early-stage team is led by former Canaan Partners principal Mukul Singhal.

Overall, the firm has about 25 people and has invested in about 50 companies across sectors such as financial technology, e-commerce, logistics and real estate.

Following the recent induction of Alok Goel as managing director, it will now also invest in areas such as enterprise software, software-as-a-service) and digital content. In March, it raised a $350 million fund—its second India-dedicated fund. This year, it has been more focused on Series A and seed stage deals, where valuations are more reasonable when compared with growth deals.