Private equity giant Warburg Pincus looks to invest in mobile companies
March 7, 2014
Dinesh Moorjani is executive-in-residence at Warburg Pincus
Warburg Pincus, a private equity firm with $37 billion assets under management and a portfolio of more than 120 organizations, is looking to invest in mobile companies across a wide range of industry sectors.
The New York-based firm has hired the founder/CEO of Hatch Labs to identify and gauge investment opportunities in the mobile ecosystem worldwide.
I am primarily evaluating growth equity investments in the mobile space where the underlying business model is proven and the company needs capital to scale and compete effectively, said Dinesh Moorjani, newly named executive-in-residence at Warburg Pincus, New York.
I am also spending time with promising early-stage companies and, in some cases, exploring buyouts, he said.
Mr. Moorjani, who will be speaking at this publications Mcommerce Summit: State of Mobile Commerce 2014 conference May 1 in New York, founded Hatch labs as a mobile technology incubator and captive investment fund. Among the startups he helped build from scratch was Tinder, a mobile social discovery service.
Prior to that, Mr. Moorjani also served as senior vice president at IAC/InterActiveCorp. and ran mobile for businesses such as Match.com and CitySearch. Previous jobs included positions at Samsung Electronics and Mainspring.
In this QA, Mr. Moorjani discusses his mandate at Warburg Pincus, the types of sectors in which he is looking to invest, developing mobile trends that may upend traditional business models and his thoughts on the planned Facebook acquisition of WhatsApp for $19 billion. Here is the interview.
Why did you join Warburg Pincus?
In addition to the firms overall impressive track record and my sense of a good cultural fit, Warburg Pincus is an experienced partner to entrepreneurs and management teams seeking to build durable companies of scale with sustainable value.
Over the course of my career, Ive been fortunate to start and run large operating businesses inside public tech companies as well as recruit stellar teams to build startups at formation through early rounds of financing.
However, I joined Warburg Pincus as an executive-in-residence (EIR) to learn from the discipline that the firm applies to its investment diligence and the unique lens through which they look to identify and act on promising growth equity investments.
You seem to have a pretty broad mandate.
As an EIR, my primary focus is to work with Warburg Pincus technology, media and telecommunications (TMT) team to identify and evaluate potential new investment opportunities in the mobile space.
While the majority of the opportunities that we evaluate are in North America, we increasingly see opportunities globally.
As a new investment is made, an EIR can partner with the existing team in a variety of roles depending on the specific situation, including CEO, executive chairman or independent director.
In addition, I am providing strategic counsel across the portfolio of existing Warburg Pincus TMT investments, which continues to be both interesting and rewarding.
What types of investments are you looking to make?
I am primarily evaluating growth equity investments in the mobile space where the underlying business model is proven and the company needs capital to scale and compete effectively.
I am also spending time with promising early-stage companies and, in some cases, exploring buyouts.
My focus across the mobile sector includes the smart device ecosystem, security, software services for enterprises and small businesses, education, local and healthcare-related technologies and software services.
Youve been in the mobile space for a while. Has the market reached a tipping point?
I believe the mobile market has reached an inflection point that substantiates additional investment in the market to help promising companies scale.
In 2012, smartphone penetration exceeded 50 percent of all cell phones in use in a number of developed markets [eMarketer] and mobile data traffic is expected to reach one-third of all Internet traffic globally in 2014 [StatCounter].
In developing markets, high-speed mobile data connections have largely leapfrogged fixed broadband.
In developing markets, short message services, or SMS Web services, are daily dependencies for social communication, business transactions and inquiries, as are mobile Web and native apps but on a lower scale today.
Furthermore, connecting to the wired Internet in a desktop environment can be expensive, time-consuming and painfully slow, often dictated by congestion on the network.
Facebooks planned $19 billion acquisition of messaging application WhatsApp is the biggest ever mobile purchase. Were you surprised?
Once I put aside the headline sticker shock, our team did a cursory analysis of WhatsApps vitals, including the value ascribed to each monthly active user (MAU), the current number of MAUs and the growth rate.
With those metrics in mind and other considerations, one might be able to better understand Facebook’s decision.
This type of acquisition is particularly interesting for an acquirer like Facebook, which may be uniquely positioned to unlock untapped value at WhatsApp.
What did you learn from your experience at Hatch Labs and IAC/InterActive Corp.?
I learned a great deal as the founder and CEO of Hatch Labs and I largely attribute this to my experience working with stellar startup teams at Hatch and pragmatic and aggressive leadership at IAC.
Two insights stand out in particular.
First, building a company, whether its an early-stage venture or an established operating company, requires people time and money.
Time and money are fixed, but motivated people are able to stretch themselves and create value even when they are faced with a shortage of resources.
This spirit of entrepreneurship applies across every stage in the lifecycle of a company when properly harnessed.
Second, I had the privilege of spending time regularly with Barry Diller and Jack Welch where I observed and learned how to distill a complex set of company circumstances and decisions into a couple of drivers that will determine performance.
With the benefit of hindsight, I also realized how impactful Hatch Labs was in the mobile market.
At Hatch, we built more than 10 startups since late 2010, including Tinder, one of the fastest-growing social discovery companies globally.
When I read testimonials from people around the world who met on Tinder, including those engaged to be married, Im reminded by how even mature markets are always ripe for reinvention.
Once Hatch Labs successfully deployed all the capital from the first fund, I closed new investment operations of the captive fund with support from IAC/InterActive Corp. and Xtreme Labs acquired by Pivotal Labs and retained the rights to operate Hatch independently in the future.
Given my commitment and focus on my new role at Warburg Pincus, I am not pursuing a second fund at this time.
Do marketers understand how the rapid consumer adoption of mobile threatens the status quo, especially with existing business models?
Yes, I believe digital marketers understand that as consumer adoption of mobile increases, marketing to these consumers is also changing dramatically.
The analytics tools, marketing platforms and associated technologies that improve contextual mobile advertising and customer relationship management (CRM) are just beginning to catch up to the needs of digital marketers.
Digital marketers know there is an order of magnitude gap between advertising dollars spent on mobile versus desktop screens, given the increasing time users spend on mobile devices.
This chasm is contracting as new mobile technologies and services are unveiled for mobile marketers to more effectively acquire and manage customer across mobile channels.
In contrast, traditional, non-digital marketing companies were delayed in embracing the principals of quantitative marketing, both online and in mobile, and still heavily rely on incomplete information to measure results and long-term brand and customer impact. However, this trend is changing.
What mobile trends are developing this year that may affect the way that brands and retailers acquire and retain customers?
The mobile trends that may affect the way brands and retailers acquire and retain customers are observable across both demand and supply.
On the demand side, we continue to see greater brick-and-mortar retail showrooming the practice of examining merchandise in brick-and-mortar stores with the intent to purchase it online adoption of mobile price and product comparison products, reliance on mobile couponing, widespread adoption of social media to communicate with and influence brands and retailers, and the convenience of mobile payments, despite its nascent stage of adoption.
On the supply side, we are noticing greater business intelligence around brand and competitive positioning in retail channels, the emergence of new mobile marketing and analytics products, mobile services to help drive in-store purchases through offers and same-day delivery/pick-up, and supply chain efficiencies that bring down operating costs so retailers and brands can improve the bottom line or compete more effectively on price.
These trends point to one conclusion, which is that consumers have more influence and choice over their purchase decisions.
What do you hope to accomplish in the first 100 days?
I have two areas of focus during my first few months at Warburg Pincus.
First, I am forging relationships with promising growth equity companies that would benefit from the financial support and strategic guidance Warburg Pincus can offer.
Second, I am counseling several Warburg Pincus portfolio companies whose businesses have become more reliant on mobile.
Dinesh Moorjani’s presentation, “Warburg Pincus: A Private Equity Firm Looks at Mobile Investment Opportunities,” is at 1:30 p.m. ET on Thursday, May 1 at the Mcommerce Summit: State of Mobile Commerce 2014 held at the Time Life Building in Midtown Manhattan