IDG plans $150M India fund

IDG Ventures, the investment arm of International Data Group (IDG), plans to raise a $150 million fund to invest in India, says IDG founder and Chairman Pat McGovern.

IDG Ventures – which is comprised of four independent partnerships managing funds in North America and Asia – closed a $310 million second fund for China last year. And it raised $110 million in 2003 to invest in Vietnam.

Similar to those funds, the IDG India effort will be funded mostly by IDG, McGovern says, though the China fund last year also raised money from the endowments of Harvard University and Princeton University.

IDG Ventures should have no problem finding potential deals in India once the commitments are raised. The avuncular McGovern announced the India fund late last month in Bangalore, India, at a local meeting of The Indus Entrepreneurs, or TiE, an influential Indian networking group.

The standing-room only crowd lapped up everything he had to say. “At the end of day, I had 75 business cards in my hand from people who told me that I’d soon find their business plans in my inbox,” he said.

IDG has long had exposure in India through its conferences, print publications and market research operations. And McGovern says that the Indian venture unit will stick to its knitting, investing in a range of technology sectors, including enterprise software, mobile communications, mobile services, energy, biotech and Internet startups.

McGovern expects the Vietnam fund to invest in about 40 portfolio companies over its life, with deals ranging from $500,000 to $3 million in a first round and from $3 million to $4 million in a second round deal. This is much like a traditional U.S. early stage venture investor, McGovern notes, but in a country such as Vietnam, the money should go a great deal further.

McGovern says he was still interviewing candidates for the managing general partner position. He expects that person, and additional five or more general partners, to staff the Indian headquarters, which will likely be based in Bangalore. He expects the firm to start investing as soon as September or October, because IDG will be the sole or majority LP.

“Unlike other firms that are typically in the market for months or years raising funds after announcing a fund, ours is open for business, the money is in the bank,” he says.

IDG Ventures becomes the latest firm to eye India for venture investments, as well as in real estate.

Media sources in India last week reported that Goldman Sachs Group plans to establish a $1 billion property investment fund for India, becoming the sixth new real estate fund to be announced for India over the last month.

Plus, Intel Capital last month announced a fifth investment in India from its $250 million Intel Capital India Technology Fund. Intel announced it is investing a non-disclosed amount in Chennai, India-based Real Image Technologies, a provider of digital media technologies for the film, video and audio animation industry.

Meanwhile, many U.S. VCs are also planning to up their involvement in India, such as Palo Alto, Calif.-based Norwest Venture Partners, which recently closed a $650 million fund. Norwest made just two investments in Indian startups from its previous fund – a $400 million vehicle that closed in 2001. But the firm is using its latest and largest fund to date to step up its international investing efforts as it has become more bullish on the Indian landscape.