EM PE Review – Volume VII, Issue 3

In this issue


Value Creation by Venture Capital Investors: The Experience of IDG Ventures India

Inside Perspectives: An Interview with Cartica Capital’s Teresa Barger

Viewpoint from EMPEA president and Ceo sarah alexander

Amidst a background of growing macroeconomic and policy uncertainty in developed markets, investors are paying greater attention to the investment thesis offered by emerging market economies.

Our recently released Q3 statistics show that 119 funds raised US$32.3 billion through 30 September, versus US$23.5 billion in all of 2010. While Emerging Asia—led by China—continues to dominate the fundraising landscape, capturing 73% of all capital raised through September, Brazil reached a record of US$4.5 billion, surpassing the 2008 peak of US$3.6 billion.

The aggregate numbers, however, mask the fact that much of the new capital commitments, particularly in Latin America, are going to the large, well-established players, making fundraising difficult for new entrants and middle market firms. This dearth of fundraising for the mid-market means less competition for investments in small- and medium-sized companies, representing an investment opportunity LPs should explore.

Meanwhile, policy makers continue to tinker with various sorts of regulations that could negatively impact PE investing in emerging markets. For the most part, these efforts reveal the need for regulators to be better educated about the value PE investing brings to companies and their countries. EMPEA has therefore embarked upon a series of initiatives to explore how the asset class creates value in portfolio companies and thus returns to LPs. Our work is intended to provide GPs with the examples they need to demonstrate the importance of PE in their markets, as well as to show LPs how active management can yield superior returns compared to public market investments.

These value creation and impact themes were central to our inaugural gathering at Capital Impact in London this October. Our work on value creation is continuing through the EMPEA Impact Case Studies series, and a new joint collaboration between EMPEA and Ernst & Young to develop statistically-based Value Creation Studies in select emerging markets, drawing on E&Y’s similar studies and methodology in developed markets.

Continuing with these themes, in this issue Sudhir Sethi of IDG Ventures India provides a practitioner’s perspective on how venture capital investors can work with local Indian entrepreneurs to create value, such as scaling operations, professionalizing management, facilitating access to follow-on financing and strengthening corporate governance.

Corporate governance is often a target value creation lever for GPs working with their portfolio companies. In this issue’s Inside Perspectives, Teresa Barger, EMPEA Vice Chair and Managing Director of the corporate governance fund Cartica Capital, explores what private equity investors might learn from listed markets. She argues that private equity investors could realize greater value at exit by encouraging their portfolio companies to behave more like listed companies.

2012 is shaping up to be an exciting year for EMPEA and the industry writ large. We look forward to providing you with valuable research and world-class networking opportunities in the year ahead.