Financial Daily from THE HINDU group of publications
Saturday, Apr 22, 2006
Financial Daily from THE HINDU group of publications Saturday, Apr 22, 2006 |
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Info-Tech - Venture Capital Software products space interests VCs Preethi J
Changing scenario VCs are looking to invest in firms working in mobile software, search , mapping and GIS, robotics, embedded software and FLOSS domains. Now, $2.5 billion is invested in early-stage funding and $3 billion in late-stage funding, but seed funding only sees $22 million. In 2005, a total of $2.3 billion was invested in Indian firms including the PIPE deals, a 76-per cent jump.
Bangalore , April 21 The time is ripe for tech entrepreneurs in the country. Venture capitalists (VCs) are turning more attentive to Indian start-ups as the adoption of `software as a service' model spreads. Customised software is now the buzzword, and firms ready with products as well as services will find a horde of `hybrid' VCs (those with bases in India as well as another country) ready to invest in them. Over the past 18 months, the interest in investments in Indian firms has changed — VCs have now begun to seek out local product companies for investment. Currently 24 Silicon Valley VCs are in India, looking to invest in local product firms, said Mr Dan'l Lewin, Corporate V-P, DPE Division, Microsoft Corporation.
Hot domains
At Microsoft India's Innovation Conference, venture capitalists InventusCap, Seed Fund, Footprint Ventures and Westbridge Capital spoke of the current situation and "hot" domains. "Now, $2.5 billion is invested in early-stage funding and $3 billion in late-stage funding, but seed funding only sees $22 million," Mr Mahesh Murthy, Managing Partner, Seed Fund, said. There is a clear indication of "serious" money now coming into the Indian software products space, said Ms Shalini Elassery, Managing partner, Footprint Ventures. She estimated that in the next three years, $500-600 million would be available to Indian entrepreneurs. The VCs are looking to invest in firms working in mobile software, search (online & offline), mapping and GIS (geographic information system), robotics, embedded software and FLOSS (free and open source) domains. In 2004, the total investment by venture capitalists in India was $1.3 billion, which included PIPE (private investment in public equities). Ninteen per cent of this amount, $250 million, was in IT, IteS and BPO firms. Software product firms only saw a $27-million investment. The chunk of the investments by VCs was in telecom and manufacturing infrastructure. Interest in software product firms was low, only mature and fast-growing industries were given attention. This attitude has changed over the past two years. In 2005, a total of $2.3 billion was invested in Indian firms including the PIPE deals — a 76 per cent jump in investment in a year. Of this, $375 million was into IT sector and a substantial $87 million was in software start-ups. Data on the two quarters of 2006 is as yet unavailable, but sources estimate the investments would have, at the very least, increased exponentially.
Regulatory issues
The VC community also felt regulatory issues must be addressed immediately. The Government needs to make more domestic capital available, said Mr Samir Kumar, Managing Partner, InvestusCap.
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