Canaan Partners is at the Crossroads in India: To Be, or Not To Be?

The rumors have been around for a while. Canaan Partners in India is at the cross roads. The Venture Capital firm has been in India since 2006 and is now under pressure to come to a decision: To stay or leave?

NextBigWhat has learned that in about a months time, the India team will have to decide whether they should raise an India fund like they did for Israel or wind down its India presence. 

Canaan Partners in India had a soft fund allocation from the main fund. The idea was to invest about 20% of the fund or nearly $150 mn in Indian companies. Canaan has made a few investments in companies like Bharatmatriomony and iYogi. The lack of exits in the Indian market is now being questioned by partners, who are looking at better returns from the US & Israel. The development was reported (behind pay wall) by VCCircle earlier today.

“We are in the midst of thinking through our future plans for India,” Alok Mittal,  Managing Director, Canaan Partners India told NextBigWhat in an e-mail. The Challenge for Alok & team is to now go out there and sell the India story again. Of course it is not impossible, there are still some positive sentiments around India left.

For instance, Sandeep Murthy, who used to head Sherpalo Ventures and Kleiner Perkins Caufield & Byers  in India recently raised $25 mn for his new $90 mn Lightbox fund. Both Sherpalo and Kleiner have pulled out of India to focus on the US markets.

The lack of big exits will clearly be the big question for partners. Pure tech IPOs in India are non existent. There are over a dozen Indian companies that are possible IPO candidates but aren’t confident enough of the market or haven’t been profitable enough to inspire confidence.

One of Canaan’s portfolio companies, Bharatmatrimony has also been struggling to get its IPO off the ground. iYogi, another company in the Canaan portfolio recently raised $28 mn in series E funding from Axon Partners, Madison India Captial and existing investors, pushing the scope for a big exit further down the road.

IPO Slowdown in India

This year has been bad for IPOs in general in India. Fundraising through the IPO route hit a 10 year low in FY14. In the year, only Rs 1,205 cr was raised through IPO.

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