In its own words, Sapphire Ventures says 2017 was a record year for the firm, which invests from a $700 million direct fund and in early-stage fund managers out of a separate evergreen vehicle.
The Palo Alto, California-based firm says it made 37 investments in tech companies and venture funds last year. The firm also saw five exits, from Alteryx (IPO), BlackDuck (acquired by Synopsys), Cyphort (acquired by Juniper Networks), Lithium (acquired by Vista Equity Partners) and MuleSoft (IPO), bringing its total to 48 since 2011.
Early in 2018, an exit in January caught attention. Sapphire’s New Delhi portfolio company, Newgen Software Technologies, went public in India. Sapphire says Newgen, a provider of IT services, marks the first enterprise company in the country to exit.
Jai Das, managing director at Sapphire, says Newgen’s IPO is just one more marker of what’s to come from international markets.
Das has had a busy schedule recently, speaking at the SaaStr conference in San Francisco in which he chatted with Alteryx Founder Dean Stocker and Ramin Sayar, president and CEO of Sumo Logic. Essentially, they are two portfolio companies of Sapphire with one recently exited CEO and a CEO who is thinking about an IPO.
I caught up with Das to ask him a few questions.
Q: Why is the Newgen IPO notable?
A: The amount of capital raised was not that much. It was about $10 million total from us and others. It was a small investment in a cash-efficient company. So it was a nice IRR.
We’ve made other investments in India. Just Dial is another. [The company went public in India in 2013.] We’ve seen success in India, where there is a lot of engineering talent. And there are a bunch of companies in the India ecosystem that are enterprise-related. They’re backed by Accel India and Nexus Ventures, and I expect we’ll hear more from them.
Q: So you’re saying you expect more enterprise companies to go IPO?
A: By and large, consumer-internet companies can raise money when they want in the private market. … They don’t need to go to the public market and have an IPO to raise cash.
So, yes, generally, we’ll see enterprise-software companies go out this year. But consumer-internet companies are headed in that direction, too, such as Spotify and Dropbox. [Neither is a portfolio company of Sapphire.]
Q: We’ve seen a growing number of PE acquisitions, like Vista buying your portfolio company Lithium. Do you expect to see that trend continue?
A: Yes. We have a few companies in active discussions with PE firms. PE firms like good companies and they like to grow them, so I see that continuing.
Q: So would you say we’re in an active seller’s market right now?
A: We’re seeing an accelerated pace pick up after the [winter] break. But the M&A market has not seen a blockbuster transaction lately. There was LinkedIn [Microsoft bought LinkedIn in 2016 for more than $25 billion] and last year we saw Cisco buy AppDynamics [for $3.7 billion]. So it will be interesting if we see some blockbuster and strategic M&A this year.
Q: I have to ask you about the blockchain. Are you being impacted by the crypto sector yet?
A: Cryptocurrencies could fundamentally change venture capital in about five years. It’s fertile ground and we’re hearing discussions about token assets invested in by venture firms and how to transfer those to LPs, but it’s not impacting us yet.
Photo of Jai Das, managing director, Sapphire Ventures. Photo courtesy of the firm.
Update: The above story was updated to reflect that Sapphire Ventures invests in early-stage fund managers from a separate evergreen fund.