The Hindu Business Line : VC looking at non-IT sectors as well

Bangalore, July 2 Indian IT companies are no longer the only attraction for venture capitalists. Encouraged by strong consumer spending and a rapidly growing domestic market, venture capital firms are now investing in sectors that cater directly to consumers.

Sectors such as retail, financial services, media, education, healthcare and others are gradually becoming more attractive to the venture capitalists as they offer high returns on investments.

In a maturing economy such as India, the non-technology sectors can offer high returns also, said Mr Arun Natarajan, Founder and Chief Executive, Venture Intelligence. This is unlike mature economies, where only the technology companies promise maximum return, he added.

In an economy such as United States, the low hanging fruits in the non-technology sectors have already been tapped. But in India, these sectors are promising. India requires a different strategy and so firms are investing outside the tech-sector as well, Mr Natarajan added.

Deterrent

In India, the market for IT solutions is still comparatively small. And this is a deterrent. Indian enterprises generally invest in “hardcore plumbing in IT”, said Mr Avnish Bajaj, Co-founder and Managing Director, Matrix Partners India.

They generally buy solutions developed by the multinationals, and seldom look at innovative products built in India, he said. For a product to be successful globally, it has to be successful in the domestic market. But in India, the domestic market is not strong, he added.

Prior to investing, a venture capital firm sees if there is innovation, intellectual property and scope for high growth. In India, these criteria works across all sectors, said Mr Bajaj.

Matrix choice

Matrix would invest in all businesses that consider India as the primary market. It includes financial services, media, network services, travel and entertainment, power and green energy, he said.

Some of the other venture capitalists are of the opinion that investments in non-tech sectors are an expansion. It is all about new areas of opportunity, said Mr Kanwaljit Singh, Managing Director-Investment Advisor, Helion Venture Partners.

Investment in the tech-sector is not going away, but new areas are being added, he said. In the last five years there has been a comprehensive economic growth that has led to rapid growth in consumption, he added.