RAISES $37 MILLION Murthy trims Infy stake to start VC fund

INFOSYS Technologies co-founder and chairman NR Narayana Murthy has sold company shares worth around $37 million to set up a venture capital fund for incubating Indian start-ups. While Mr Murthy did not respond to an email query sent by ET, a statement issued by Infosys said the venture capital fund would encourage and support young entrepreneurs having brilliant business ideas.      "The fund will primarily invest in India and may, on a case-to-case basis, consider investing overseas," Infosys said in a statement.      In a statement to the stock exchanges on Thursday, Infosys said Mr Murthy had sold eight lakh shares, some 0.13% of the company, on October 21 and October 22, raising around Rs 174.3 crore.      Mr Murthy has intimated the company that the proceeds will be used as seed capital for a proposed venture capital fund to be set up by him in India.      Mr Murthy is not the first Infosys founder to have set up a fund for incubating emerging companies. NS Raghavan, one of the seven Infosys founders, started Nadathur Holdings and Investments some nine years ago, and is now serving as chairman of NS Raghavan Centre for Entrepreneurial Learning at IIM-Bangalore.      In an interview with ET a few months ago, Mr Murthy had shared his ideas about incubating new start-ups. For Mr Murthy, who had borrowed money from wife Sudha Murthy to start Infosys, mentoring and incubation are his passion.      Experts in the industry welcomed the idea of a fund backed by Mr Murthy. "It is good to have people who are seasoned entrepreneurs turning into a venture capitalist," said Srini Vudayagiri, founder-partner of Stega Capital.      The VC industry in India has primarily seen three kinds of funds: one set up by large corporations, second by seasoned entrepreneurs and the pure VC funds. Wipro's Premji also runs a PE fund  HOWEVER, industry observers believe that it is also important to create that 'Chinese' wall, when a person like Mr Murthy starts funding start-ups, as he is still very much a part of Infosys Technologies.      Saurabh Srivastava, one of the investors and president of the India Venture Capital Association, said more entrepreneurs like Mr Murthy should come forward to help other companies achieve success.      "This is exactly what we need here, and this is what Silicon Valley is made of," he said.      "Having founded and run your own successful venture, there is a need to give back to the society too," he added.      Infosys, on its part, has already incubated two start-ups — On Mobile and Yantra — with the former going on to become a listed entity. Meanwhile, Wipro chairman Azim Premji already runs a private equity fund, PremjiInvest, with investments being made in both listed and unlisted companies across retail and healthcare sectors.      Private equity firms invested about $763 million across 47 deals during the quarter ended September 2009, according to early data from Venture Intelligence, a research service focused on PE and M&A transactions in the country.      Infosys scrip closed around 2% higher at Rs 2,211.5 on the Bombay Stock Exchange on Thursday.