Infosys ties up with VC firm to tap start-ups

Bengaluru: Infosys Ltd has partnered with Palo Alto-based venture capital firm Vertex Ventures US Fund I Lp to boost its access to start-ups focused on disruptive technologies.

The move by Infosys Innovation Fund, which has an outlay of $500 million, puts India’s second-largest software services exporter in the league of technology titans such as Google Inc. that (through their corporate venture arms) have partnered with VC firms across the globe to find the next big thing.

Vertex Ventures was set up by former Facebook executive Jonathan Heiliger and former Accel Partners executive In Sik Rhee earlier this year. The VC firm has raised $141 million from 41 investors to back start-ups in areas ranging from cloud computing to cyber security.

An Infosys spokeswoman confirmed the investment made by Infosys in Vertex Ventures without specifying the amount. Mint could not independently ascertain the size of Infosys’s investment. An email sent to Heiliger remained unanswered.

“Our strategy of partnering with a VC is something which other corporate ventures of technology firms too have followed. It helps us quickly reach the scale we eventually aspire to as it is challenging for any one firm to find the most innovative start-ups,” said an executive familiar with the development. The executive declined to be named as he is not authorized to speak with the media. “This approach helps us maximize the new-age technologies being worked by different start-ups to some of our clients,” said the executive.

Infosys is looking to partner with other VC firms too.

“This does not mean that we will be only partnering with this VC firm. It all depends on what interesting portfolio firms we can get from other VC firms and in what geographies we can get access by partnering them,” the executive cited above said.

Earlier this year, Google Ventures’ European branch invested in Oxford Sciences Innovation Plc., a company that funds spinoffs from Oxford University’s tech and science departments.

Vertex Ventures has already invested in four early-stage start-ups, including California-based storage start-up Hedvig, and PerimeterX, a Silicon Valley-based start-up focused on cloud security.

Some experts, however, questioned the rationale of Infosys engaging with a US-based VC firm, and said a similar partnership with an investor focused on emerging country like India may have been more been beneficial.

“I hate to be so critical but Indian IT companies are falling off a cliff with their infatuation with Silicon Valley. The big opportunities are in India. That is soon going to be the largest, (most) open, Internet market in the world,” said Indian American technology entrepreneur and academic Vivek Wadhwa.

Since former SAP AG board member Vishal Sikka took charge as Infosys’s first non-founder CEO in August 2014, the company has been aggressive in engaging with start-ups. Sikka right away set aside $100 million as part of Infosys Innovation Fund, which was later increased to $500 million at the start of 2015.

Infosys’s strategy to back startups is markedly different from that of rival Wipro Ltd.

Wipro Ventures, the corporate venture arm that is overseen by Rishad Premji—son of company chairman Azim Premji—has a two-member team based out of the Bay Area in the US and has made investments in four start-ups; it has until now shied away from partnering with any VCs.

Infosys Innovation Fund is overseen by Yusuf Bashir, a former SAP colleague of Sikka’s. Under his watch, Infosys has spent $18.4 million and picked minority stakes in three start-ups. That includes $1.4 million for a 5% stake in ANSR Consulting, a Bengaluru firm that helps global firms set up offshore captive centres in India, and another $15 million in a spin-off unit of Dreamworks Animation. Infosys also spent $2 million to pick a minority stake in in Airviz, a personal air quality monitoring start-up from Carnegie Mellon University. Additionally, Infosys has made two acquisitions in the last 13 months, spending $320 million to buy automation technology provider Panaya and digital commerce firm Skava.