Public Policy in India’s Thriving Venture Capital and Private Equity Industry
By Archish Mittal, MBA ’23, Emerging Markets Institute Fellow
Historically intertwined relations of business and policy
The largest and most influential investment funds in the world maintain close relationships with governments, political leaders, and diplomats. The founder of the Carlyle Group, David M. Rubenstein, himself served as the deputy domestic policy advisor to United States President Jimmy Carter before starting the private equity (PE) giant in 1987. The Carlyle Group, which now has over $300 billion in assets under management, is headquartered in Washington, D.C.—the powerhouse of global diplomacy. In the past decades, Carlyle has boasted leading policymakers as its board members and advisors, including former U.S. President George H.W. Bush and his Secretary of State James Baker. But this is not just a Carlyle story: The intertwined relation of global investments in private markets and the public sector is more pronounced than ever in 2022.
The majority of “mega funds”—including Warburg Pincus, KKR, Blackstone, and the Carlyle Group—have always maintained a lean and nimble public-policy team. The teams usually comprise of former government officials, ex-bureaucrats, and top military veterans. But recently there has been a shift in the way investment funds track macros, policy changes, and regulatory affairs. It is not only about analyzing global macros and portfolio allocation; it’s also about ensuring that investments are safeguarded well against the regulatory environment and that investment teams stay abreast of the policy changes and political shifts in each geography. One of the key reasons for this transition is the growing investment in emerging and frontier markets—especially countries like India and China. As the dry powder from venture capital (VC) and PE firms finds its way to new shores in search of higher returns, navigating the complex regulatory environment, dealing with bureaucrats, and keeping a hawkish eye on the policy landscape is critical.
Growing venture investments in India
In the last two years, India’s PE and VC landscape has witnessed over 1500 deals valued at over $100 billion. This sudden influx can be attributed to a burgeoning middle class and increased access to technology, which provides a fertile ground for tapping a large consumer base. From a policy standpoint, India is becoming a far more favorable destination for international investors vis-à-vis China, due to the recent crackdown by the Chinese government on tech companies such as Alibaba and Tencent.
Historically, international investors have been wary of writing big checks for Indian companies due to political and regulatory uncertainties. But India has risen rapidly from 142nd in the World Bank’s 2014 ease of doing business rankings to 63rd in 2022. With the growing investments in the Indian startup ecosystem and conducive policies, India has proven to be the country of choice for investors—whether it’s early-stage startups, growth equity, or leveraged buyouts.
Need for strong policy teams for investment funds
Due to the heightened exposure of emerging markets in global portfolios, investors have begun to realize the need to create sophisticated policy teams to consistently track regulatory affairs and policy developments. In June 2022, Sequoia India and Southeast Asia decided to double down on the region by launching a $2 billion early-stage venture and growth fund for India and an $850 million dedicated fund for Southeast Asia. To ensure that its massive capital pool is protected from policy shifts, Sequoia created a policy team with a dedicated chief policy officer in India. Similarly, the Carlyle Group recently established a position for a government affairs lead in India, and Prosus (formerly Naspers) already has a strong public policy team in India. The fast-changing regulatory landscape in India coupled with the inflow of global capital has generated a new demand for public policy professionals who can navigate the public-private corridor and provide strong support for investment funds and their investee companies.
Towards 2030, as India continues to grow at a breakneck speed and positions itself on the world stage as an investment hub, the strategically interwoven world of public policy and investments will be a decisive business function. As investors continue to diversify global allocation, there is a need to keep a sharp eye on political risk, regulatory affairs, and the fast-changing regulations for the VC and PE industry in emerging and frontier markets.
About Archish Mittal, MBA ’23
Archish Mittal is an Emerging Markets Institute Fellow who has experience working on public-private partnerships at McLarty Associates, International Solar Alliance, and East-West Institute. He is a member of the Heidelberg International Club, a Next-Gen Scholar at the Center for High Impact Philanthropy at the University of Pennsylvania, a councillor at the Atlantic Council, and a member of the Young Leaders Circle at the Milken Institute. Mittal is completing his MBA at Cornell University’s Samuel Curtis Johnson Graduate School of Management in the SC Johnson College of Business. He holds a BSc (Hons) in investment and financial risk management from City University, London, and an MA in law and diplomacy from the Fletcher School at Tufts University.