A sunny deal for Blume: Indian VC took the road less travelled and won

India is three times sunnier than Germany which is the world leader in solar power. The country relies heavily on imported fossil fuels, so the potential for solar power to mitigate India’s energy shortages has been evident for some time. Green tech startups are not blind to this, but investors haven’t been enthused enough, drawn more to the booming ecommerce and mobile tech opportunities in India.

Blume Ventures is an exception. Back in June 2011, this early stage Indian VC made a bet on greentech company Promptec Renewable Energy Solutions, which makes LED and solar lighting products. This was one of Blume’s first investments.

And now, Promptec has closed an acquisition deal with Havells India, a US$1.4 billion electrical goods company. Havells will acquire 51 percent of Promptec at an enterprise value of INR 65 crore (US$10.3 million).

It’s a sunny deal for Blume Ventures, being the only institutional investor in Promptec. “We saw the promise. Apparently most VCs thought it was boring or undifferentiated and the PEs thought it was too small,” Karthik Reddy, managing partner of Blume Ventures, tells Tech in Asia.

We started with an INR 10 million (US$158,868) cheque in an INR 20 million (US$317,737) round but we singularly pushed in every direction we could. We played another small round and another. Our limitations as a small fund hurt our ability to grow [Promptec] even faster. But we arranged private debt and assisted with the Small Industries Development Bank of India (SIDBI) as well.

Today, the business has grown almost six times since Blume first came across the company. This now counts among a string of winners for Blume, including InMobi, TaxiForSure, and ZipDial.

No smooth ride

Bangalore-based Promptec was founded in 2008 by Kiran Moras, Joshy PP, and Nikhil Das. The company makes outdoor high wattage lighting systems such as LED and solar street lights, flood lights, and high mast lights as well as home lights, solar lanterns, and solar charging stations. It made news when one of its projects helped light over 300 kilometers of roads in India with LED.

It hasn’t always been a smooth ride for Promptec, though.

“While it always had a very innovative tech team that drove low cost innovation on design, drivers, and other elements, it required constant innovation. And the business – manufacturing, sales, and distribution – was fundamentally capital hungry,” Karthik Reddy says.

The financial slowdown didn’t help either, “since people pulled back on the incremental capital expenditure in infrastructure and industrial stuff in 2012 and 2013. LED prices and acceptance has taken off in the last 18 months but it was tough to drive growth with very little additional capital available,” he adds.

If Blume had succeeded in convincing another VC to co-invest in Promptec and infuse at least a million dollars, the company would’ve grown to twice the current value, he says with a tinge of disappointment.