Happy 2015 – BVG

Happy New Year 2015– BlackstoneValleyGroup

Hello Folks, it has been a long time since I took to blogosphere to share my thoughts and updates – the delay is a result of me trying to manage my time and juggle across many priorities!

2014, seems to be a bumper harvest year for all sectors –We saw record IPOs – Alibaba ($24 Billion) & VC firms seemed to have abandon the “Millions “in company valuations as they raced with each other to catch the Ubers, HomeJoys, Lyfts and make your head spin with every new investment round pushing the B in Billion higher! Hey Angels weren’t left that far behind… Angel investing took an interesting turn with a couple of big Angel Investors now leading Series A round themselves!

So how did we do – The pic below is a powerful indicator of what we didn’t accomplish much in 2014 –we came very close to inking 3 deals but no Cigar. 150% effort but nothing to show for it :)For 2015 – we have dry powder and we are on the hunt!


àLet us take a look at why our focus is on BIM for the next few years: Labor Force in Millions! And the Emerging Middle Class!


Source:IMF 2014

These are huge marketplaces by themselves. Let me share some stats —

Brazil: Urban population: 87% of total population (2010)
Rate of urbanization: 1.1% annual rate of change (2010-15 est.)

Total Population: 202,656,788 (July 2014 est.), with over 44% in (25-54 years age bracket)

India: Urban population: 31.3% of total population (2011)
Rate of urbanization: 2.47% annual rate of change (2010-15 est.)

Total Population: 1,236,344,631 (July 2014 est.), with over 41% in (25-54 years age bracket)

Mexico: Urban population: 78% of total population (2010)
Rate of urbanization: 1.2% annual rate of change (2010-15 est.)
Total Population: 120,286,655 (July 2014 est.), with over 40% in (25-54 years age bracket)

{note: Mexico City is the second-largest urban agglomeration in the Western Hemisphere, after Sao Paulo (Brazil), but before New York-Newark (US)

(Source: World Factbook)

Ok – That is our stat section – now time for Hat Tipping and acknowledging some of the biggest influencers on me personally. Warning! I am going to name drop in a big way here …with a full disclosure that I do not know any of these great individuals nor do I have any delusions of them having heard about me (but it is on my bucket list to meet all of them –Ahem!).These game changers are leading the wave of innovative approaches to entrepreneurship and crafting a path for the baby angels (newbies like us to follow :)!

Ben Horowitz /Marc Andreessen (Co-Founders of www.a16z.com )

Peter Theil (www.foundersfund.com)

Bill Gurley (www.benchmarkcapital.com)

Mark Suster (http://www.bothsidesofthetable.com)

Jason Calcanis (www.calcanis.com)

Gil Penchina (www.angel.co/penchina)

As a side note, Ben also wrote the best business management book out there – The Hard Thing About Hard Things” (if you haven’t read it please put in on your reading list)

And that’s it – I do promise to at least a quarterly if not more frequent update!   Please hit me on twitter @BlackstoneVG or I can be reached at rvohra@blackstonevalleygroup.com




BlackstoneValleyGroup : Updates

Hello Folks! It has been a crazy 1Q 2014 – I have a brief comment related to taxes but also have some updates on what is happening around the BVG world.

BVG Updates:

1) I recently did a guest piece for Glen Aaron – an expert attorney in offshore matters, business advisor and published author at:


2) Dee (Dr. Deepak Kotak) – Congratulations are in order for Dee and please join me in wishing him all the success in his new role as Executive Vice President of Bio Electronics Corporation. Please see the press release below for the full details:


Go Dee!

3) John Bosley has decided to retire. The good news is that he still will be available when needed but since he wont be around the corner office – we will have to seek him on the biking trails and now rumor has it on the Golf course.

John you can bike/snowboard/golf :) but cant hide – we will find you!

I am very excited by the turn of events and look forward to the continued brilliance and wisdom of Dee and John as they help me navigate the BVG ship.

Ok now – why have I been slacking in posting here – I have been busy with travel and with the focus in the last few weeks been on the tax/accounting periods. In India, the fiscal year end is March 31st; here our tax returns are slated for April 15th (am hoping to move BVG fiscal to June 30th for 2014-15). Why? Then I can report a full year performance for all my Indian investments – instead of pro-rating till Dec 31st and then repeating the process after the March 31st close. MX accounts – that is another blog post. We have not made much inroads into Brazil, primarily because it is our belief that the assets are inflated to their relative value and we haven’t been able to do deeper research to make a decision one way or another.

It is a wrap for now…Watch this space for more as we have recently started discussions to launch our own BIM Equity (Long/Short) fund….


Growth Equity as a Distinct Asset Class

Guest Post by Dr. Dee Kotak

Friends, here is the first guest post in a series of guest posts by BVG

Board of Advisors and without further ado…here we go..


Hello Friends, Raghu had asked me a while ago to think about a guest post for the BVG readers and I had recently been assessing some potential growth investments and had been thinking about what particularly differentiates these types of investments from other private equity investments and recalled some recent work that crystallized my thoughts.

In August, Cambridge Associates published data from the last 10 years that show U.S. growth investors outperforming virtually all major public market indexes over a 3, 5 and 10 year period. Growth equity investors also outperformed venture capital firms over all time horizons measured. Overall, growth investors enjoyed returns of 15.6% over three years, 7.6% over five years, and 12.7% over ten years, compared to 11.4%, 4.1% and 6.9% for venture over the same periods. Growth firms also outperformed buyout firms for over 5 and 10 years, and were on par over 3 years.

What is Growth Equity?

Cambridge Associates defines growth equity as “investment in established companies to accelerate growth”. These target companies share many of the following traits:

  • Founder-owned
  • No prior institutional investment
  • Proven business model (established product and/or technology and existing customers)
  • Substantial organic revenue growth (usually in excess of 10%, and often more than 20%)
  • EBITDA-positive or expected to be so within 12-18 months

Company Reasons for Taking on Growth Equity

Although these companies have by definition been growing without institutional capital, there are a number of reasons why it is subsequently considered appropriate to accelerate growth by investing in new product development, human capital, infrastructure, or new geographic regions; other reasons include making add-on acquisitions or to monetize a portion of the management’s ownership.

Investors’ Perspective

Growth equity investments will typically be minority stakes using little if any leverage at investment, and often are expected to be the last round of financing needed. They often have built-in safeguards for investors as well.  For example, growth equity is typically placed in a more senior position than common equity, and often comes with negotiated negative control provisions and approval rights to mitigate the risks of owning a minority position. For instance, investors may receive the right to approve the annual business plan, new acquisitions or divestitures, and/or the issuance of new debt or equity.

Additionally, a growth equity investor will often have the right to participate in or initiate a liquidity event following a certain period of time, typically three to five years.  It is in the area of capital loss ratios that growth equity really distinguishes itself as an asset class. In the U.S. between 1992 and 2008, growth equity investments generated an overall capital loss rate of 13%, compared to 35% for venture capital and 15% for leveraged buyouts. The comparability of loss ratios between growth equity and leveraged buyouts is noteworthy.

According to Cambridge Associates there is often a perception that buyouts, which invest in established companies with stable cash flow, should have superior downside protection. However, financial leverage applied to cyclical businesses adds a degree of risk not typically encountered in growth equity investments.

Looked at in a slightly different way, from 1992 through 2008, growth equity deals generated a gross multiple of invested capital (MOIC) of 2.0, in line with venture capital and ahead of buyouts (1.7). However, as you might suspect, not all MOICs are created equal. For example, nearly 60% of venture capital was invested in deals valued at less than cost, compared to 35% for growth equity; further, nearly 60% of venture capital value was created by the mere 6% of capital invested in deals that generated an MOIC greater than 5, while similarly high-performing deals in growth equity accounted for 9% of invested dollars, but only 37% of total value. In other words, while growth equity has (as noted earlier) delivered historically similar returns, it has done so with far less dispersion, both among managers and deals.

Potential Appeal for Investors

“While growth equity shares some characteristics with other private investments, its potential appeal clearly derives from more than just ‘splitting the difference’ between VC and PE,” said Peter Mooradian of Cambridge Associates and coauthor of the Commentary “Growth Equity is All Grown Up” (link). The Commentary delineates three key reasons for growth equity’s appeal:

  • Secular growth focus. Growth equity investors seek out companies with rapid organic growth, often in sectors growing faster than the overall economy, making it a potentially rewarding strategy in a low-growth macroeconomic environment.
  • Lower risk profile: Growth equity investments involve no or low leverage; are senior to management’s equity ownership; and have a full set of protective shareholder and governance provisions, all of which mitigates downside risk. Portfolio companies also tend to have lower technology and/or adoption risk than earlier stage VC-backed companies.
  • Strong performance. Since 2000, growth equity funds have generated strong returns and have outperformed US venture capital. Moreover, conditions appear to be in place for them to replicate their success going forward.

Growth equity should now be considered a distinct asset class with different characteristics from both venture capital and private equity, even though it shares traits of late-stage venture capital and leveraged buyouts. The realization that growth equity potentially provides a better risk/reward profile than other forms of private equity may lead to greater competition in this sector. Furthermore, now be the time for founders to be less fearful of private equity in general and to consider the many benefits that come with attracting growth equity. In my next blog I will consider some of the challenges faced by a rapidly growing company.