The human resources management industry is the new target of serial entrepreneur Mr Varun Talwar, Chief Executive Officer of India's first HR-focussed venture capital fund, The HR Fund.
The fund will concentrate on providing venture capital to HR service start-ups like temping and staffing firms, training and HR software development firms.
Set up in November 2011 with a corpus of Rs 60 crore, the fund aims to cash in on an expected boom in the industry, which is still in a nascent stage.
The fund's journey started when seed investment company Withya Group, of which Mr Talwar was a co-founder, funded HR outsourcing start-up PeopleStrong. The company has grown by about 10 times in five years.
“We realised that there was a lot of potential in the HR space. So, we studied the market in the US, where there are 30-40 publicly traded companies in the space.
“In India, there is only one company that is publicly traded — Naukri,” he said. The opportunity of consolidating the HR market attracted the giants of the industry such as Mr Santrupt Misra, CEO of Aditya Birla Group's Carbon Black business and HR Director for the group; Mr Venky Mysore, CEO and Managing Director of Kolkata Knight Riders, and Mr Arvind Agrawal, President (Corporate Development and Group HR) of RPG Group.
The HR Fund plans to focus on four segments — professional employee organisations, contingency staffing, training, and HR software companies.
With about 25,000 staffing companies in India, this segment's size is $2 billion.
“With consolidation, this space can grow. There are lots of small companies in HR space,” he added.
Biggest challenge
Mr Talwar said the biggest challenge in India was that entrepreneurs did not want to take money to scale-up and this prevents growth.
“Classically Indian HR companies are mom-and-pop. My job is to differentiate the roles of shareholders, board of directors and management teams because only then can you start scaling up,” he added.
The due diligence is on for the first project this fund plans to invest in — an HR media company that plans to develop a social media to bring all HR professionals on one platform.
Mr Talwar added that the fund will invest about Rs 2-8 crore in each start-up. It plans to fund four more within this year.