Facebook eyes minority stakes in Indian startups

BENGALURU: Facebook is looking to back more startups as a minority investor in India, participating with traditional venture capital and private equity investors. The move is a first for the social media major, which typically invests for majority control or acquires 100% stake in other startups in the US and other markets.
“Facebook does not do minority investments anywhere in the world. This is an extremely unique Indian programme, where we are making consistent minority investments. The idea is to accelerate this even more,” said Facebook India VP & MD Ajit Mohan. He told TOI that the Menlo Park-based company, with a market capitalisation of $600 billion, will increase its pace of investments in new-age companies here.
India is the largest market in terms of customers for Facebook, which has about 260 million users as of January based on data from Statista. Messaging application WhatsApp, which is owned by Facebook, has 400 million monthly active users.
According to Mohan, Facebook does not have any constraint on the size of investments. But underlying themes would be startups that are uniquely Indian, focused on inclusion, and delivery of internet’s benefits beyond the large cities. This comes after Facebook invested in education technology startup Unacademy, along with General Atlantic, in a $110-million round last week. It had also backed social commerce startup Meesho in June last year, along with Naspers (now known as Prosus). But its first deal in India was in 2014 when it acquired Hyderabad-based performance analytics startup Little Eye Labs.
According to people aware of the matter, Facebook, for now, will largely be writing $20-25 million cheques for startups. It will focus on growth-stage startups while remaining sector-agnostic. Facebook did not comment on the investment size. Typically, these startups rely on Facebook or its group companies — WhatsApp and Instagram — for multiple aspects like building a network, advertising and marketing.
Mohan highlighted how both Meesho and Unacademy see large parts of their users being from tier-2 and -3 markets. In terms of engaging with early-stage startups, Facebook also runs its venture capital brand incubator programme where it has tied up venture capital funds like Fireside Ventures and SAIF Partners.
Mohan said he is working with many new-age ventures as part of his day-to-day mandate as many of them “disproportionately gravitate towards Facebook platforms” for various needs. On top of that, he is working along with the corporate development team, which specialises on the minority investments of Facebook in India. He did not share the details of this team.
While large Chinese internet companies like Tencent and Alibaba have emerged as active investors in multiple unicorns (worth $1-billion and more) in India, US technology majors like Google and Facebook have not been as active as investors in startups. Investors tracking the space said Facebook taking a more collaborative approach will help them partner with more startups.
“In general, good things happen to companies that have good customer engagement and are creating real value. Facebook’s entry as a minority investor is a good one since it is not looking to run these companies and founders will also be more open to having them as an investor as this is non-threatening to them,” said Prime Venture Partners managing partner Sanjay Swamy.

Original Source