The Hindu Business Line : Gabriel Venture Partners to step up India investments

Mr Chadda, told Business Line, "VCs are excited about investments in India and are actively assisting entrepreneurs to build industry leaders. The macro economic trends provide a great opportunity to create compelling companies."

GVP focuses on IT and services companies, which include areas likenanotech and expects to step up its India investments directly.

"Much of the new fund-raising has been for cross-border funds and many US-based funds will begin to invest directly in India and China in 2006, much as Gabriel began to in 2005.''

"Unfortunately, given the significant amount of capital looking for a home, this translates to a lot of `dumb money' that is investors who are following the next hot space, without looking to build industry leaders with a hands-on approach," he said.

"Gabriel has been investing in India since 1999, with an indirect investment through the SPG Infinity Fund, which backed such companies as Indiabulls and IndiaGames. In 2004, direct investments in India were with Tejas Networks, Allsec, Provogue and IL&FS InvestSmart. We are in the middle of closing some more Indian investments," Mr Chadda said.

"A lot of our US companies such as NetScaler (acquired by Citrix Systems for $325 million), LVL7 Systems, Concuity, IP Wireless and many others are leveraging India for offshore development."

Trends point towards late-stage capital moving earlier in the US, pricing up a lot of Series B and C deals that lack focus. At the same time, investors looking to be capital efficient, as well as cash-savvy entrepreneurs, are beginning to offshore to countries like India at an earlier stage in the company lifecycle.

Many companies at Series A have begun development offshore to keep their own expenses low and limit the amount of headcount they need to grow in the US.