Nexus Venture Partners makes exits look easy. In the last 18 months, the Mumbai-based venture capital investor has racked up six exits, out of which five have turned in more than decent profits. The only dampener has been online hotel rooms aggregator MagicRooms. Nexus managed to recover its original investment of Rs 7 crore ($1.5 million), when online travel agent Yatra acquired MagicRooms last August.

Still, five hits out of six, is not a bad record for a first-time venture capital firm, especially in the Indian market. At this juncture, the firm may be looking at an average IRR (internal rate of return) of 35 per cent on its first two funds, though this could not be confirmed. Nexus India Capital I and Nexus India Capital II, raised in 2007 and 2008 respectively, have a combined corpus of $320 million. About $210 million has been invested in 35-odd companies. The combined value of the profitable exit deals concluded by the firm so far stands at approximately $585 million (based on an aggregation of deal sizes reported in the media or in press releases).

A closer look at each of those exits (an event where investors sell their stakes in a portfolio company) throws up some interesting details. To begin with, barring MagicRooms and Netmagic Solutions, all the deals involve technology companies that operated on the cross-border model (startups that either had dual operations in the US and India or a focus on both markets). None of the deals, except MagicRooms, had Nexus as the solo investor, though in several cases it was the lead investor.

Finally, and most importantly, mergers and acquisitions have been the preferred exit route. It begs the question: could Nexus have reaped higher returns if it had waited longer? Were there IPO candidates among the six companies it exited? The answer to both questions, says co-founder and managing partner Sandeep Singhal, is yes. However, the decision to exit those companies at the time was the right one, he adds.

To understand why, we walk you through the details of the exit run:

August 2010 | OLX

Entry: Alec Oxenford, co-founder of Buenos Aires-based online classifieds site OLX, knew Nexus co-founder Suvir Sujan from his earlier role as advisor to Baazee (the online auction site Sujan co-founded and sold to eBay). Nexus entered the company at the Series B stage, investing $5 million in 2009 from its first fund.

Exit: In mid-2010, South African media company Naspers started a due diligence of the company, with the purpose of making a strategic investment. Within 2-3 months, it decided that it would acquire a controlling stake in the company. Nexus was not initially keen on exiting the company. “We felt that it had the potential to IPO on Nasdaq,” says Singhal. However, it did not want to stay on as a minority shareholder either. Naspers bought out all of OLX’s shareholders, including Nexus, for a reported $20-40 million.

January 2011 | Dimdim

Entry: The Nexus investment in open source web conferencing startup Dimdim was the result of a cold call. In 2007, Sujan noticed that the company’s product was seeing reasonable downloads and decided to fly down to Hyderabad, where Dimdim’s development center was located, to talk to the founders. He caught CEO DD Ganguly just on his way out to the US to finalize on one of two investor term sheets he had received. “DD wanted to get an opinion from Danny Rimer at Index Ventures before he signed a deal. So we introduced them and that got DD interested in us,” says Singhal. Nexus eventually participated in a $2.4 million Series A round alongside Index and Draper Richards. The three investors later followed up with a$6 million Series B round. Both rounds came from Nexus’ first fund.

Exit: Sometime in early 2010, Dimdim entered into a strategic partnership with open source CRM software maker Salesforce. While working together, Salesforce expressed a desire to make a strategic investment in the company. Mid-way through negotiations, the San Francisco-based company decided that it actually wanted to buy Dimdim. Though Nexus felt at the time that Dimdim could have grown into a larger play on its own, it decided to concede to the founders’ wishes to sell out. Salesforce bought Dimdim for $31 million.

July 2011 | Cloud.com

Entry: Nexus co-founder Naren Gupta and partner Jishnu Bhattacharjee, who work out of the firm’s Silicon Valley offices, happened to meet Cloud.com founder Sheng Liang at a conference. At the time, the Nexus team was scouting a cloud-based software infrastructure management company that catered to Indian enterprises. Cloud.com had a focus on the Asia Pacific region and fitted in with Nexus’ investment thesis. It first invested an undisclosed amount in the company in 2009 in a Series A round alongside Redpoint Ventures. In May 2010, Nexus, Redpoint and Index Ventures invested another $11 million as part of the Series B round. Both rounds came from Nexus’ second fund.

Exit: When Citrix Systems made a unsolicitated offer for Cloud.com, Nexus’ Gupta felt it was too early and tried to dissuade the founders from selling. He felt that the company had the potential to IPO in two years and probably at a half a billion dollars valuation. Citrix acquired the company for a reported $200-250 million.

October 2011 | Gluster

Entry: Silicon Valley-based serial entrepreneur Anil Godhwani, who was an angel investor in Gluster, introduced the company to Nexus’ Naren Gupta. The cloud-based storage solutions startup was in the market for a Series A round of funding. Nexus led a $3 million round in 2008 and followed up with a $8.5 million Series B round alongside Index Ventures in 2010. Both rounds came from its second fund.

Exit: Open source enterprise solutions company Red Hat approached the Gluster team with a buyout offer. It was keen on adding a storage component to its existing platform, which already addressed the operating system and applications end of the business. Nexus and Gluster’s other investors, as per norm, decided to test out the deal with other potential buyers and found that the Red Hat offer was the highest. Red Hat acquired Gluster in a $136 million all-cash deal.

January 2012 | Netmagic Solutions

Entry: Netmagic became part of the Nexus portfolio, when the venture capital firm acquired the defunct eVentures India’s residual portfolio of four companies in 2007. Nexus co-founder Sandeep Singhal was earlier part of the eVentures India founding team. Netmagic had originally raised $4 million from eVentures and Global Technology Ventures, back in 2000. In 2008, Nexus and Fidelity International came in with a $18 million second round of funding. This was followed by a $15.7 million third round of funding in 2010, which was led by Nexus. Both rounds came from Nexus’ first fund.

Exit: Much before NTT Communications entered the picture, Netmagic had received an acquisition bid from an undisclosed buyer based in the Asia Pacific region. Post-acquisition, the buyer planned to take the combined entity public. Again, as per norm, Nexus and other investors decided to test the market for other buyers. “This is the only deal for which we actually engaged an investment banker,” says Singhal. The result was three higher bids, one of which came from Tokyo-based NTT. “The first bidder dropped off,” says Singhal. NTT was eventually found to be the best fit and it acquired a 74 per cent stake in the company for an undisclosed amount. Unconfirmed media reports put the size of the deal at $128 million.

In a couple of months, or more likely earlier, Nexus is expected to announce its third fund. The corpus is speculated at $250 million. The six-year old firm’s maiden exit run will play a big role in determining how and where the upcoming fund will be deployed.

Images Courtesy: Nexus Venture Partners & Companies

Lead Photo Caption: (From left) Suvir Sujan, Anup Gupta, Sandeep Singhal and Naren Gupta

The Santa Clara, California-headquartered company offers a social marketing platform that allows brands to analyze and track social marketing campaigns. It was founded in 2009 by former America Online executive Santanu Bhattacharya and Madhu Therani, who earlier managed software development at Reputation.com. The company has offices in New York and Bangalore. Its current roster of clients include Campbell Soup Company, MediaCom and United Online.

What others are saying about the deal

• Social media marketing startup Salorix lands $3.5 million Series A (TechCrunch)
• Social marketing startup Salorix raises $3.5 million (VatorNews)

The company’s founder and managing director, Niranjan Gupta, earlier started online airline ticketing site Flightraja, which is now known as Via and backed by NEA-IndoUS Ventures and Sequoia Capital.

Nexus co-founder Suvir Sujan will join the MagicRooms board. The firm has $320 million under management and has invested in 20 companies here so far. Its other Internet-related investments include DimDim, Komli and Vdopia.

(Source: Press Release)

Biggest Gathering of CleanTech Companies in India

Date: Thursday, December 17, 2009

Time: 9.oo am to 6.00 pm

Venue: Marriot Convention Center, Hyderabad

More details on the event website or here

Register here

Agenda

• 9.00 am – 1.00 pm: Renewable Energy, presentations by 20 renewable energy companies
• 1.00 pm – 2.00 pm: Lunch Break
• 2.00 pm – 4.00 pm: Energy Efficiency and Services, presentations by 10 energy efficiency companies
• 4.00 pm – 5.00 pm:  Recycling and Transportation, presentations by recycling companies
• 5.00 pm – 6.00 pm: Smart Grid and M2M, presentations by 5 smart grid companies

Source: Press Release

Photo Courtesy: TiE