The Hindu Business Line : Global venture funds eyeing Indian opportunities

WITH recent visits by some leading Silicon Valley venture capital firms and technology mentors, there are signs of fresh investments in the IT and biotech sectors within start-ups with separate India-focused funds.

However, Indian venture capital investments declined by about 50 per cent in 2003, with most of the investments being pumped into existing companies.

In a strategic review of the venture capitalist industry for 2004, the National Association of Software and Services Companies (Nasscom) has observed that the Indian venture capitalist sector faced a challenging environment.

Contrary to popular belief, the total quantum disbursed in India has been estimated at $530 million in 2003, a sharp decline compared to the disbursements of about $1.1 billion during the previous year.

Of the 85-odd firms in the country, the top 10 account for nearly two-thirds of the total investments.

Mr Vinod Khosla, General Partner, Kleiner Perkins Caufield & Byers, who was in Hyderabad recently, said that the global venture capitalist industry was looking at markets like India and the Asia Pacific region for fresh investments.

The investments could go beyond IT and biotech into new areas such as nanotechnologies and new materials.

Mr Ashish Gupta, Vice-President (Shared Services), Tavant Technologies, said: "Exploring venture investing in India is currently fashionable. A large number of venture capitalists are touring India, verifying its attractiveness as a destination."

He added: "There are a number of issues they face - early stage investing is tricky, firms lack personal networks in India, the deal size in India is small compared to US deals making the fund economics messy."

"India does not have a track record of intellectual property-based companies; they have become specialised due to the evolved venture capitalist market in the US but here no niche is developed enough," he said.

The fact remains that the bulk of venture investments in India are later stage (private equity). Early stage is largely angel financed.

At a recent technology conference, where a host of venture capitalists converged in Hyderabad, several funds based in the Europe and the US announced their keenness to invest in India ether directly or by creating a separate India fund aimed at supporting start-ups.

One such fund is Redmont Venture. The Managing Director, Mr Michael Alder, said that they were evaluating the possibility of partnering in India for investments.