Perspectives from ISB

Over the last year, Reliance Industries has backed more than 40 startups such as Covascis, Ecorithim and Videonetics through GenNext Ventures, the venture capital arm of Reliance Industries, which has a war chest of Rs 200 crore. They have an ongoing four month acceleration program run in partnership with Microsoft Ventures, to help technological start-ups, scale up operations through mentoring and infrastructure support. Similar initiatives are also underway in the Aditya Birla Group and the RP Goenka Group. The RPG group has already evaluated close to 50 proposals and is interested in minority stakes at Seed or Series-A funding level.

Another avenue through which family businesses are exploring the digital start-up market is through business stalwarts. For instance, post retirement from the Tata Group as chairman, Ratan Tata has already made more than eight investments in Indian and international companies, of which five are in internet-based ventures. Here is a list of his investments: Grameen Capital, Paytm, CarDekho, Swasth India,Urban Ladder, Bluestone, Snapdeal, Altaeros Energies. Similarly, PremjiInvest, an investment firm owned by Azim Premji, made a quiet start in 2006 and has since built an estimated portfolio of around $16 billion. Infosys co-founder, Narayana Murthy, had also set up Catamaran Ventures in 2010 with a corpus of Rs600 crore. Catamaran has joined hands with Amazon, the world’s largest online retailer, to set up an e-commerce joint venture in India.

This new direction in corporate entrepreneurship by family businesses in India reflects their desire to rejuvenate and be entrepreneurial while being risk-averse at the same time. Investing in startups in the digital space requires considerable investments and is risk-prone. Meanwhile funding existing startups and providing resource based support is an easier option to test the waters. Hence in many ways it is a win-win situation as apart from access to capital and resources, tie-up with a leading family business provides instant recognition and acceptability to the start-ups.

Source: ‘Big family businesses like Reliance, Birla showing more interest in Start-ups in the Digital Space’, Economic Times, September 17, 2015