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Infosys mulls to invest Rs 750 crore in startups in Silicon Valley, Israel & India

The Economic Times:  March, 2015

Bengaluru: Infosys plans to allocate a quarter of its $500-million (about Rs 3,000 crore) fund to invest in startups in Silicon Valley, Israel and India along with venture capital firms.

India's second-largest software services exporter has had discussions with about two dozen VC firms, including Andreessen Horowitz, for such investments, two people familiar with Infosys' strategy said, requesting anonymity. "There are no formal agreements with any particular VCs. The strategy is to back startups and entrepreneurs with ideas that align with the company," one of them said. "The idea is not just to be a passive financial investor but take disruptive solutions to customers.

Infosys Chief Executive Vishal Sikka is seeking to broaden the company's offerings in newer areas of technology to differentiate it from rivals such as Cognizant and Wipro amid a rapidly evolving technology landscape.

The company made its first startup investment last month, sinking about $15 million in a firm spun off from Dream-Works Animation. Shortly after, Infosys bought US and Israel-based automation startup Panaya in a deal estimated to be about Rs 1,200 crore ($200 million).

Infosys is not the only Indian technology firm to have set up a separate arm or fund to invest in startups.

Last year, crosstown rival Wipro set up a corporate venture arm with a corpus of $100 million to invest in startups. In an interview with ET in February, Sikka said Infosys was holding discussions with venture capital firms almost daily. "We are looking at around a dozen companies to invest in," Sikka said. "We have invested in one already, which is the Dreamworks spinoff. We have invested about $15 million to that and we are also on the verge of investing in an amazing company that makes air quality sensors in the area of Internet of Things.

"Around six months from now would be a good time to take stock of the progress so far -- the team is being built, strategies (are) being fleshed out," the second person mentioned above said.

Ritika Suri, who joined Infosys from SAP late last year, is leading the startup fund and mergers and acquisitions.With the Panaya acquisition, Infosys is also hoping to tap into Israel's startup ecosystem deeper."Panaya offers a ready network, opportunities to hunt in what's among the best startup clusters in the world," the second person mentioned above said.

India's biggest software companies are rushing to change their revenue mix as top customers including Daimler and Walmart push them for more innovative solutions.

These companies are hoping to find the next disruptive idea by tapping into the world of startups. Experts tracking startups said companies such as Infosys and Wipro are unlikely to bet on radically disruptive startups that could compete with or disrupt their own core businesses and would generally back companies that would complement their existing operations. "Most of the investments that corporate venture arms of companies make are mostly amplifications — by definition if it is disruptive to the current business it will not. Because no BU (business unit) leader will buy something that is disruptive to their existing business," said Sharad Sharma, co-founder of iSpirt, a thinktank body for software product startups.