Trident Capital has over US$ 1.6 billion of capital under management, including US$ 400 million in its most recent fund. Trident focuses on health care, information services, Internet and Cleantech. The firm invests across multiple stages, including traditional venture capital investing, as well as investments in micro-cap public companies, buyouts and consolidation
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| Venetia Kontogouris Managing Director, Trident Capital |
Venetia Kontogouris’s acquaintance with India goes all the way back to the 1950s and 1960s, when her aunt was a frequent visitor to the country, and she herself has been one since the 1980s. DARE spoke to her about the current economic scenario and other venture capital-related issues. Here are some excerpts:
Given the current economic scenario where companies are seeing significant value erosion, what are the options available to investors to (a) protect their investments; and (b) help investee companies that are in trouble to survive and prosper again?
This is an unprecedented devaluation of all financial assets that is requiring all companies to curtail unnecessary expenses, with survival being the only important metric. All other things are secondary. So investors have to do everything that is in their power to ensure that their investee companies survive.
Assuming that recapitalization is one of the options available, when would be a good time to start recapitalizing? What criteria would you put for selecting suitable candidates for recapitalizing?
Recapitalization should be done as soon as possible, before the remaining investor cash is depleted. In my view, a suitable candidate for recapitalization would be one generating positive cash flows.
Many startups seek to build scale and valuation while sacrificing profitability and stability in order to drive up their valuation. Can this be avoided? If not, what checks and balances can be put in place to minimize the risks associated with this move?
Unless a new venture can have a very short runway to profitability, or some type of proprietary IP, there is little opportunity for growing valuations in the current environment. Like I said before, survival is the main goal and metric. Building scale and valuation is secondary in the current situation.
We have heard many experts state that the fastest way to come out of the current downturn is to have more entrepreneurs. But if you take this year’s business school passouts as a benchmark, lesser numbers are taking up entrepreneurship. Do you agree with this view? If not, why? If yes, how can entrepreneurship be boosted globally?
I agree that we need more entrepreneurs. And the only way to have more is for government policy around the world to be more business-friendly. But unfortunately, most governments are targeting businesses as a way to boost their own declining revenues and in order to fund increased deficit spending.
For someone whose knowledge about India goes way back, your India portfolio is quite slim; just five companies – Outsourced Partners, Microland, Minglebox, Neilsoft and Elucido. Why?
The rest of my India portfolio companies have been successfully sold or exited through the public markets: Cognizant, eCredit, Environmental Data Resources and Risk Management Solutions, among others. My strategy is to focus on companies that are able to bridge the US and India. I have only recently begun focusing on domestic Indian companies and the process is time-consuming, especially in times of the economic crisis. Also, valuations have remained stubbornly high in India, and I am waiting for the right opportunity.
As a venture investor and looking back, what is the one decision you are proud of? Why?
Deciding to spin off Cognizant from IMS Health as an independent company and helping it grow to become a leading Fortune 500 company, before the outsourcing trend was established.
What was the toughest part about implementing that decision?
It was very difficult to get the IPO going. It took me nine months of hard work to recruit outside board members and to convince Wall Street to support the IPO. It was tough because Cognizant was a corporate spin-off, and till then the success rate of a spin-off of a listed business in the share market was pretty slim.
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| We like to invest in companies in the expansion capital phase for a three- to five-year period, and since the IPO route is pretty well shut for the time being, we look for companies that would make an attractive merger/acquisition candidate for larger publicly traded companies. |
Are there any benchmarks you would like to create out of the Cognizant story?
Cognizant was originally a US$ 2 million investment that eventually became US$ 1 billion corporation. That is a very good benchmark to have.
And the one decision you wish you could change?
With respect to India, I passed up investing in several other outsourcing companies since we like to avoid potential conflicts of interest.
What is your investment strategy? What sort of businesses do you look to invest in and for what time frame? What is your preferred exit mechanism?
We like to invest in companies in the expansion capital phase for a three- to five-year period, and since the IPO route is pretty well shut for the time being, we look for companies that would make an attractive merger/acquisition candidate for larger publicly traded companies.
Assuming some one is making an investment pitch to you, what is absolutely essential to make you interested/make you invest?
I look for demonstrated ability, passion and commitment from the entrepreneur.
How much time do you personally spend on companies that you are a director of? In what areas?
I attend monthly/quarterly board meetings in person if possible, and spend time on the phone reviewing operational issues with more time spent on younger companies, but at least several hours per company per week on an average.
Beyond capital, what else does Trident Capital bring to the table for a potential investee?
Creative product development ideas, industry and client contacts, sales strategies and overall strategic directions. We also help recruit key management when necessary.
As a venture investor, what is your dream? Is it finding and investing in the next Google?
I tend to be more modest. I would be happy just helping entrepreneurs achieve their dreams. And if it happens to be the next Google, so much the better.
And what is your nightmare?
Not having interesting companies to review.
What should an entrepreneur looking for investments be vary of?
If you are an entrepreneur looking for funds to grow your company, you should be vary of investors (for example, some hedge funds) who invest based on a purely trading mentality.
There are many companies starving for funds right now. But given low valuations, is this a good time for them to seek funds. If not, what other options should they explore?
Let’s face reality. When you really need funds, it is always a good time to seek funds, especially when the future is uncertain as it is today. Other options are to cut costs as much as possible, and have a plan in place in case things get even worse.
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