Long-Term and Loyal Investment in Growth-Stage Companies

By Paul Asel, Managing Partner, NGP Capital

NGP Capital is a global venture firm with $1.2 billion under management. With offices in China, Europe, and the U.S. and also an active presence in India, we have a global perspective on technology and innovation. Our focus is on the connected world—we look into how we can influence the cloud and mobility using AI, and how it augments the daily digital life of consumers while enabling and disrupting the market and industries. Our global team looks for pattern recognition in sectors that are relevant to each of our geographies. We focus on three areas—the digital health industry, transportation logistics, and the intelligent enterprise. The knowledge of what is important in each of our geographies helps us in making smarter investments. We are looking for companies in the growth stage that already have product shipping, customers who validate the technology and business model and global entrepreneurs.

"‘Our focus is on the connected world—we look into how we can influence the cloud and mobility using AI,  and how it augments the daily digital life of consumers while enabling and disrupting the market and industries."

Please shed some light on your investment style and strategy.

When we look into a new sector, we typically do not start investing immediately. Instead, we send a representative to understand the sector. We explore advisor issues and gather ample insights before investing. Eventually, we delve into the development of sector-specific companies in the area and conduct intense discussions with their CEOs before proceeding with investing in the sector.

Only after analyzing sectors over a period of three to seven years, we invest in them. We are developing a portfolio of companies that have shared interests and experienced shared opportunities and challenges in their respective markets. Our aim is to bring them together, providing them with an opportunity to revolutionize their practices using our observations from pattern recognition, and strategic insights to increase their likelihood of success.

What are the emerging technology trends that could help companies in tackling the challenges in the realm of the connected car?

Our interest in this sector has only grown with the maturation of ecommerce, which also drives significant development in the logistics space. Large ecommerce companies have started integrating vertically. This leads traditional players to the realization that they need to follow the trend as well, and also have access to logistics capabilities to develop a competitive offering.

As Logistics is witnessing massive growth, the sector is also investing in the application of efficient technology and intelligence. The smart commuter area, an element of the smart mobility space, is also piquing the interest of investors due to the advent of accomplished driving. Different forms of smart transportation are emerging, such as smart bikes, e-scooters, shared transportation models and the like, which are ushering in more investments in this space.

From the perspective of startups, what are the possible pain-points in procuring appropriate funding? What attributes do you look at while evaluating a deal?

There is a lot of capital available for startup companies and well-performing growth companies. However, a chasm exists between these two, whereby a company has funding for a concept but needs financing that enables them to scale their business. We look for companies that are sub-scale, have deputy investors or the like. We seek a management team that can scale their business globally. Growth-stage companies whose fundamental unit has been validated or has a clear pathway to profitability and have customer traction in growth interest us. We are looking for entrepreneurs with a sense of urgency, domain experience and leadership capabilities to attract stakeholders— partners, funding and people.

Tell us about the post-investment scenario. How do you streamline the efforts of your clients?

We are focused investors. With multiple investments across the globe, we look for ways to bring them together to discuss their challenges and opportunities. Secondly, with our detailed analysis of sectors, we have gathered many insights and also provide monthly newsletters about these sectors. Working in close partnerships with the CEOs, we make them aware of the market condition and help them understand how it can affect their business. We guide them on the right time to expand nationally and internationally. Through our networking, we help them find people who can aid in accelerating their business.

Do you follow a procedure for the acquisition of startups?

A vision map with the CEO we are funding is developed to have an idea of their ultimate vision and the timeline we are looking at. We often look at long-term investments. As per our observation, successful acquisitions rarely happen unexpectedly—it usually results from partner investment. We typically look to a broad network of people we work with and encourage the CEOs to engage effectively. Businesses that become advisors or are invited to the board of companies being funded by us are from our extensive network. Sure enough, the collaboration within the management team leads to the success of a company.

Where do you see yourself in the future?

With an aim to become a global investor, we shall continue to focus on the industry sector and approach it with detailed insights. We understand the need to bring in more capital to maintain a steady growth rate. We look forward to bringing in more advisors and continue to grow our business.

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