Gujarat Venture Finance Limited – Creating milestones since last 30 years

Gujarat Venture Finance Limited
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Highly regarded as the pioneer of Venture capital in the country, GVFL Limited (formerly Gujarat Venture Finance Limited) is an independent, autonomous Board managed venture finance company based in Ahmedabad, Gujarat. Founded in 1990 at the initiative of the World Bank, it has supported ventures working on cutting-edge technology as well as encouraged entrepreneurs with innovative ideas.

Since its inception, GVFL has raised eight venture capital funds which were invested in over 94 technology and growth-stage companies. Today, GVFL has divested over 70% of its portfolio companies with handsome returns. The company has carved a niche for itself by making marquee investments in early-stage companies across sectors. It has also made investments in growth-stage companies in the manufacturing and infrastructure sector across India from the Golden Gujarat Growth Fund.

Indian Economy & Market reached out to its Managing Director Mr. Dukhabandhu Rath, to understand the various initiatives and future plans of GVFL Ltd. Mr. Rath is a career banker with 38 years of experience and has earned his laurels for his contribution in the field. Credited with expanding the presence of SBI in Bangladesh, he spearheaded Ahmedabad Circle (Gujarat, Daman, Diu, and Dadra Nagar Haveli) of SBI as Chief General Manager.

“GVFL has been at the forefront of ‘Atmanirbhar Bharat’ long before the word was coined”

There are a lot of disruptions happening in the entire segment of the economy in these critical times. Please elaborate on the kind of crises you faced and what has been the impact of Covid and lockdown?

In the last few years, we have seen major business disruptions happening due to cheap internet and smartphone penetration. With the technological innovations, the innovators are playing a disrupting role in the economy. With the advent of cryptocurrencies like Bitcoin, these tokens are being unofficially used as a currency without Government or central bank oversights. Such disruptions were never thought of before.

But Crypto aside, we see that technology is playing a disrupting role in medical, defense, education, finance, and almost all other activities. At GVFL our intention has been and continues to be to support entrepreneurs who are disrupting the industry for a larger good. If the technology is scalable to better the lives of millions of people, we are ever ready to make an investment.

To answer your second part, Covid and Lockdown did create a lot of uncertainties with us as well as in our investee companies. By the grace of God, none of our employees or the entrepreneurs of the investee companies were affected severely by Covid. During Covid induced lockdown, our major emphasis to our investee companies was to preserve cash. This was not a major worry because as an investment thesis we do not invest in cash burn business models, but we still had our eyes on the cash component in every business. A couple of our investee companies that were under change of business plans ran out of cash, but we were quick to do follow on investments into these companies.

Please let us know how the journey began 30 years ago? 

The real credit would go to the Government of Gujarat for the establishment of GVFL Ltd. When World Bank proposed a Venture Fund in 1990, when the word “Venture” was almost unheard of, the visionary leaders of the Government of Gujarat gave the nod to establish GVFL Ltd., which was one of the first Venture Capital funds in India. We also created milestones in the form of launching one of the earliest Biotechnology Fund, one of the earliest Information Technology funds. We launched an Infrastructure Fund, which again is a unique milestone in the venture capital industry even today. To date, we have not lost any capital from our past funds and continue making good returns in our current funds.


At a Glance

  • Founded in 1990 at the initiative of the World Bank
  • A forerunner to support untried technology-based projects
  • Raised 8 venture capital funds, 
  • Invested in 94 technology and growth-stage companies 
  • Divested from over 70% of its portfolio companies with handsome returns
  • The First 3 funds – GVCF 1990, GVCF 1995, and GVCF 1997 has been liquidated with good returns. 
  • SME Technology Venture Fund focuses on early and growth-stage technology companies. 
  • Launched its latest Fund, ‘GVFL Startup Fund’ 
  • Actively scouting for differentiated investment opportunities

What is the current status of the sector you are operating in?

As of date, we are a sector agnostic investor. We would like to invest in companies that are scalable through technological intermediation. Our overall portfolio is a balance of investments into enterprise startups and consumer internet startups. Our underlying thesis is around investing in India-based companies building products for the world.

GVFL has been making investments in most early-stage companies, but do you also make investments in growth-stage companies? 

At GVFL, we historically made investments in the Startup Stage of a funding cycle. As you know, there are three stages of funding, Seed, Startup, and Growth. We are typically Startup Investor. Almost all our investments were in the Startup Stage. However, understanding the market, we have decided to be present in all the 3 stages of the funding cycle. We are currently raising funds for a Growth Stage fund called GVFL Emerging Enterprises Fund. It is already SEBI registered and is anchored by the Government of Gujarat.

We will shortly launch a Seed Stage fund where the Government of Gujarat would be the anchor investor. By mid-next year, we are planning to register another Startup Fund. So, we will have funds to cater to entrepreneurs in all three segments.

What about Golden Gujarat Growth Fund? Is it focused only on Gujarat-based companies?

The Golden Gujarat Growth Fund was created with a mandate to invest in infrastructure, clean energy, and mid-sized businesses. There was no location barrier for us to invest, but we ended up making investments in Gujarat-based companies as Gujarat is at the forefront of infrastructure development in the country.

Please let us know about the “GVFL Startup Fund” Does it cater across sectors?

GVFL Startup Fund is a sector-agnostic fund. It is a pan – India fund where we invest in companies based out of Mumbai, Delhi, Bengaluru as well as Ahmedabad. It is our latest fund and has performed very well. We hope that by the end of its life cycle, the fund would cross benchmark return to our Investors.

What are your future plans and what strategy are you going to adopt after the Covid crisis gets fully over? 

Our investment thesis has been very clear since the inception of GVFL. We invest in first-generation entrepreneurs who have unique products or services and are scalable. We do not invest in cash burn models.

We always cherish funding entrepreneurs who have good ideas, have patents to back them up, and can invest money to see their dreams coming true in the form of products/services. We’ve signed MOU’s with leading incubators and accelerators to assist our Investment team for deal sourcing. We also reached out to major corporates and PSUs to assist our entrepreneurs to get more business or do pilots to demonstrate their products. Very recently we entered into an MOU with iHub to promote entrepreneurship among the students. With respect to the funds, as mentioned earlier, GVFL has plans to offer 3 funds; one at Seed Stage, one at Startup Stage, and another Growth fund.

How GVFL is contributing to the government’s AtmaNirbhar Bharat Scheme?

I would like to mention that GVFL has been at the forefront of AtmaNirbhar Bharat since 1990. We have always made investments in entrepreneurs who have contributed by helping in import substitutions, export promotion, and employment generation.

Looking at the current excitement in the startup ecosystem and leveraging on decades of full investment lifecycle experience in startup investing, we have launched ‘GVFL Startup Fund’ which focuses on highly scalable, innovative business models, across, sectors, which use technology as an enabler or differentiator and are backed by credible teams. Through this, we made an investment in “Optimized Electrotech Private Limited”, a Startup in the defense space. We invested in this company when the product was not ready and the promoters only had IPs and Know-how to build the product. It took some months before promoters could build their products and now their products are being tested by Army, Navy, Air Force, and other critical services. They have created an Electro-Optic Surveillance System which can detect at a range of 18 km, recognize at the range of 10 km and identify at the range of 500 meters. The product has won IDeX competition and is being considered for purchase by the defense forces. This is a unique company that would benefit from large defense orders and will also help in implementing defense offset contracts. This would be a truly AatmaNirbhar Bharat product.

“During Covid induced lockdown, our major emphasis to our investee companies was to preserve cash. This was not a major worry because as an investment thesis we do not invest in cash burn business models, but we still had our eyes on the cash component in every business.” 

 

“We invest in first-generation entrepreneurs who have unique products or services and are scalable. We always cherish funding entrepreneurs who have good ideas, have patents to back them up, and can invest money to see their dreams coming true in the form of products/services. We’ve signed MOU’s with leading incubators and accelerators to assist our Investment team for deal sourcing.”

About the author: IE&M Team
IE&M Team
Indian Economy & Market is an Indian media and information platform producing data-backed news and analysis on all the vital elements at the intersection of the economy, stock markets, mutual fund, insurance, commodities, currency, technology, startups and business.

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