There has been a lot of activity and news about global venture funds targeting the Indian market. However, commitment through direct presence has been elusive by some of the largest funds.
The silicon valley venture ecosystem is very well developed, and over years there have been thousands of learnings that are engrained in minds of venture capital community. By not getting direct participation of that community, I think India is losing out that knowledge and experience. I think some successful valley venture firms setting up direct India presence and committing time of their partners to India (beyond keynote speeches) will go a long way in lending maturity to the Indian ecosystem.
No issues with getting the moolah in, though 🙂
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Well, I see this trend to be a natural evolution of so-called “eco-system”. Get your feet wet and then allocate resources is quite a time tested approach, albeit may not be the only or the best one for all.
Some of Sumanth’s points echo widely held perception that VCs are in the business of taking risk! In reality, VCs are in fact in the business of taking “bounded risks” (some of the examples of that are herd like behavior…nth Expedia play, which by the way is no exception. Anyone remember disk drives, pet foods, network storage etc etc? Happy to explain “bounded risks” in a separate blog). Innovative ideas carry “concept risks” which require deep insights, bold approach alongwith careful execution, not to talk about conviction and foresight. Most VCs, not even valley folks let alone Indian VCs, do not venture into “concept risks” territory. If that is the reality, does it really matter that much if US VCs are simply sending in cash (to co-invest with Indian VCs) as oppose to spending time in India, as Indian VCs will at least know how to help execute (if VCs really help do that :)). Concept risks require a lot more in-depth, on the ground reality check, than a me-too, replicate existing model plays. By the way, my experience tells me that if one ever finds an investor who really is into venture investing (takes “concept risks”), thank god and your karmas in prior life :), pay his weight in gold and really cherish that relationship, otherwise be understanding of so-called other VCs who are no more than “financiers”.
While on this topic, thought should narrate a recent cocktail party conversation with a VC just to spark a discussion here. I asked an Indian VC about his take on travel space in India. Despite 5-6 well funded travel portals, he said that his firm is seriously looking at investing in yet another travel portal because none of the companies funded (5-6 of them) yet truly gets it. Mind you all but one was still at pre-launch stage and he was not joking. Says something about so-called VC investing?
Alok,
Interesting observation…I believe that the answer to the “why” question can be found in the type of investments made by these firms so far – they have inevitably been in companies attempting to replicate US success stories in India – in the manner of “Expedia for India” (travel portals A, B, C…Zzz), “Netflix for India” (70mm) and of course, “Monster for India” (naukri – ironical given the presence of Monster India, I guess!) – so the “India story” for these VCs seems to be bringing the world to India – in terms of replicating US/global successes locally – rather than taking India to the world – which would have been a far more laudable goal.
When the emphasis is on this approach, it probably does not make sense for these VCs to devote their own time/effort in India when they can follow an “outsourced model” – given that there is no imperative for these US-based VC to lend original thoughts and ideas to a portfolio company that can simply follow an existing success fractal (probably a bit oversimplistic but the broad contours are valid) – double carry notwithstanding !
As an Indian entrepreneur, this is disheartening in many ways as it sends out signals that following this India-focus model is probably more likely to land funding than attempting to build a global success story…guess we need to build the “true India story” on our own much like the success stories from Eastern Europe and China…
Cheers,
Sumanth
We need the Indian investment scene/investors to mature, ie., full spectrum from RBI bonds to Angel financing. In this context I welcome the slow entry of the successful players from other domains. Now only we are phasing out fixed deposits slowly and moving towards mutual funds.
The slow maturity will allow the cultural characteristics and other ingrained traits to emerge and integrate as it evolves. This is very important as investments are a way to address societies aspirations and problems.
Cheers.
-Balaji S.
Warren buffet said ” good investing sometimes is not investing at all ” ….
As a corollary, if you are in doubt or have no time to spare, do not invest.
What else explains the madness amongst private equity players entering India to invest millions of dollars in ” Travel Portals ” ? Don’t they find nothing better to invest in India than online travel business ? ( which at best is cyclical, heavily dependent on the level of internet penetration in the country and also frequently subject to travel advisories due to outbreak of diseases, terrorism and the like )
There’s a clear herd syndrome here….if one PE / VC likes a project, every other boards the wagon….the lucky entrepreneur ends up with multiple term sheets and plays hard ball…..Deja vu Mutual Fund scene of 1999-2000 ? the mistake made by mutual fund managers then was every mutual fund mirrored one another’s portfolio ( thereby avoiding spending time on probity and due diligence )…and the investors paid heavily for the fund manager’s indifference.
Watch the space….hope it’s gonna’ be different this time around….!
Alok,
Agree with your analysis..Too many “white men” are coming to India with bag full of money for investment.
I think if these companies put few of these men on ground here in India. It will do a good to Indian system.