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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Sumnath,
If you keenly follow the pattern, startup VC field goes something like this.
If the project is promoted by an Entrepreneur who has the resources to be a VC himself, all firms flock to it with their moneybags. Eg. Gridstone Research founded by Basab Pradhan and a few ex-Infoscions. They were funded by Maverick capital with a bagload of money to last three full years of their working capital to feed over 350 Analysts / Consultants. Project is no bleeding edge either – It’s just going to be an aggregation of financial and other related data of top 700 US corporates to be made available to subscribers. Basab says this would be of great assistance to US analysts / Investment Bankers – he should know better. But already there is this grievance that the information overload in the wall street resulting in irrational analysts forecasts misleading investors and other intermediaries ( Recently Apple Q1 results and guidance fell way off forecasts leading to a `Harakiri’ in derivative segment ). Now do you think yet another research output would be the next cool thing….?
The bottomline….VC’s have long lost their ability to be good judges of a great opportunities. What will they do…? Do the next best…follow the herd…! Simple, isn’t it…?! That way, they cover their asses better…!
Way out….? Dream up a great project, assemble a team of fired up guys thro networking ( Venturewoods is a great resource, I think ), put whatever little money you can muster, whisper a silent prayer and go straight ahead…One good hit and look over your shoulder…..VC’s would have lined up…!
Best
@Alok’s comment:
“From what I hear, there should be more than 10 funds with more than $500 m of early stage money (tech oriented) in the next few months”
I have been hearing this for more than a year now but has not really translated into too many active early stage funds yet. The funds that are up seem to be primarily into mid-stage and pipe despite their avowed interest in early stage…look no further than Westbridge – except for a couple of investments in earlystage startups in “hot” areas (online travel, mobile comm), most of their recent investments have been in the mid-stage or later (indiatimes, brainvisa, royal orchid, indecomm. The only true early stage VC in India, Jumpstartup has been unable to raise a follow-up fund and is therefore not investing currently and the likes of Inventus are not operational yet.
Speaking of Westbridge, their “acquisition” by Sequoia was confirmed in the press today. Apart from it being a rare occurence by itself (a VC firm acquiring another VC firm), I would actually posit that it reiterates the points made earlier in this post about the low priority that Silicon Valley VCs give to India – Sequoia chose to take this unusual path to enter India and what’s more they have aligned with a VC firm whose partners have no real grassroots level experience in building successful enterprises in India (most of them are from the typical Ivy-league MBA/blue-blooded consulting (McKinsey, Bain) background…only one of the partners has any experience as an entrepreneur – a failed dot-com in Chennai) – meaning they didn’t carry any meaningful “local” knowledge or experience that Sequoia would not have had if they chose to place their own people in India.
The other red flag in the news release, mentioned almost in fine print, was a statement from Doug Leone that the primary fund would be tagged “Growth Fund” – I see more mezzanine and pipe investments essentially frontrunning planned IPOs by a few weeks/months – so early stage entrepreneurs should not hold their breaths waiting for a mandate from Sequoia any time soon!
Cheers,
Sumanth
Jacob
Sequoia, westbridge, kleiner and all thrive on early stage investments. You might see an odd late stage investment, but expect them to do fair bit of early stage. From what I hear, there should be more than 10 funds with more than $500 m of early stage money (tech oriented) in the next few months,
Alok
Seems like interesting times for Indian Companies. . . . .But, curiously, much of this action is focused on funding the growth and expansion plans of Indian Inc. I do not any significant activity in the start-up’s – the early stage activity which actually involves more commitment of time/resources than money itself – maybe this explains the “ignoring the ecosystem because of no time” phenomenon
I am not very sure if such an approach will help anyone except the funders themselves?
Does anybody have a contrary view?
Hi
I guess it’s juts too much hard work for the VCs to spend time studying and understanding the ground realities in India before putting their money into an enterprise. India has its unique problems that need unique solutions. The business of Internet business is a lot like advertising as far as India goes — what works in the West need not work out here.