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Wednesday, February 01, 2006

VC Investment Scene In India – Activity Levels Picking Up

Just got off the phone from someone in the valley and was pleasently surprised to note the number of top level people – very senior executives in the tech industry, several VC’s who have all travelled to India in the last two-three weeks. Sumant Mandal of Clearstone recently said that close to a billion dollars have been recently raised for investment in indian based private tech firms. I recently wrote about the state of the VC investment culture in India and my struggle to come out with an answer to the question - when to expect the likes of next google to come out of India. Truth is that in general most indian enterprises are hardly innovation chasing entities, and the framework for VC entry & exits are poorly defined. Coupled with limited VC activity in the past and archaic regulations – these make it a tougher breeding ground for enterprises like that of what is seen in the valley. VC’s and Angel’s may find it difficult to spot the next Flickr coming out of India. Angel investments and VC are so close to each other – the absence of one hurts the other very badly. The big company boards in India are mostly filled with family members and friends. The investor activism is very limited – the culture in general cascades across the ecosystem – the concept of family acting as passive investors leaving the running of the enterprise to professionals are quite limited in numbers and where in vogue it is mostly within well defined spheres of activities - in such cases direct compensations are better and not necessarily linked to sweat equities. Correspondingly the spark needed to work on innovative ideas aided by sweat equities for key employees second to many levels down mostly does not exist. The ecosystem inside India is also tough where job market dynamics at senior levels are less active compared to what we see in the western markets. The talent levels inside India continue to be very high – all it requires is a vibrant ecosystem. Thats all set to change albeit slowly.
Red Herring writes that early-stage funding in India has been the bane of would-be entrepreneurs, with starry-eyed young men and women rejoining the ranks of the employed after failing to raise any capital. The recent economic boom in India has resulted in increased entrepreneurial opportunities for people with new, innovative product ideas, or disruptive business and delivery models. It’s a climate where startups are springing up in every area. The fear is they will die if they are not supported early enough. TiE now is promising a framework to make entrepreneurs and investors meet and says that it is ready to provide key mentors—such as service providers in the areas of legal services, tax and accounting services, recruiting, and incubation, who are said to be already on board. Several funds for investments in india -of all sizes are getting launched. Thought the big investors would take a direct route.It may also be noted that Ray Lane & John Doerr , of Kleiner, Perkins, Caulfield and Byers, are currently touring India along with Ram Sriram of Sherpalo – all clear signs that the acitivity levels are increasing fast. We can now watch out for a report summarising investments committed during this quarter - this time things are really beginning to move in india tech investments. Though the days of the next google coming out of India may be a little far fetched.

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