We are very reluctant to do any large-scale acquisitions: Sridhar Vembu
BENGALURU : Zoho Corp. has been strategically investing in startups with the intention of building critical technology know-how in India. On Tuesday, the Chennai-based software-as- a-service (SaaS) company invested $5 million (about ₹35 crore) in Voxelgrids, a Bengaluru-based startup that builds magnetic resonance imaging (MRI) scanners, to develop deep technological capabilities and intellectual property (IP) in India. In an interview, Sridhar Vembu, co-founder and chief executive officer, Zoho, talks about the company’s investment and acquisition strategy. Edited excerpts:
Why is Zoho’s focus more on investments rather than acquisitions?
Part of an investment is in the learning process of building the technologies. In cases of acquisition, you are acquiring existing capabilities. So, you are not really learning or building anything new. That may make sense from a financial investment point of view, but we are not really financial investors. We are a startup, and strategic know-how investor. The other aspect is about culture. It’s very difficult to blend company cultures. It is well known that when companies merge, often there’s a lot of cultural and management conflicts. Most acquisitions fail because of cultural incompatibilities. For that reason, we are very reluctant to do any large-scale acquisitions.
Will you just be an investor in Voxelgrids, or is it a strategy to enter the medical devices market?
We are already in the medical devices space with our investment in vTitan, a Chennai-based medtech firm, engaged in a broad range of medical devices used in critical care units of hospitals. So, that’s an area of critical interest for us in the long term. It’s an area of high technology which contains a lot of software content, so it is of interest to us. Also, these are high research and development (R&D) areas that definitely fits Zoho’s strategy and philosophy. That is why we chose to invest in it.
Will you continue to invest in similar companies, and what will be the ticket size?
We have already invested in the semiconductor space through Signalchip, a fabless semiconductor company. Again, it is part of our long-term efforts to help develop technology in India. Semiconductors are a crucial area because it has a very strong synergy with software. So, that’s something we will be investing in apart from the medical devices area. We have also invested in computer vision and related areas, which involve artificial intelligence to analyse images and take actions. We are also investing heavily in audio-video capabilities and building of artificial intelligence (AI) capabilities on top of that. A lot of R&D efforts are also going on internally in these areas. Externally, when we find somebody doing something interesting, and would like to receive an investment from Zoho, we look at those companies. In terms of investment size, it will be in the range of a few million dollars, similar to our existing investments.
Are there any integration opportunities with these investments ?
There are integration opportunities. For example, say, for something like an MRI (machine) or any medical device, there are software components to it. They are typically of three types—software that runs inside the device, software used to analyse the images that come out, and software that integrates with various healthcare systems at the hospital level. And potentially, we could contribute in at least one or two of these areas. For example, the software that integrates with hospitals, we already have a subsidiary that builds and analyses that software. We are interested in the AI part of it as to how software can be used to do better analysis.