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August 31, 2007

Where are (the worthwhile) Indian Internet and Mobile cos.?

Today's DNA has an article quoting VCs like Avnish Bajaj of Matrix Partners and Ashish Gupta of Helion VC - who were earlier Internet entrepreneurs themselves - saying how they were finding more interesting companies to fund outside of these sectors.
"If I were to look back, and observe what has happened in the past one year, I think internet and mobile have been disappointing in terms of current opportunities. We still haven't seen enough of promising, innovative, made-for-India kind of start-ups," says Bajaj. He adds that when they started out, he would have expected to do 4-5 deals by now in internet and mobile VAS, as opposed to the two he has made.

..."Across the board, most VC funds have at least a couple of investments in the internet and mobile space. But the rate at which these investments have taken place has been slower than what everyone had made it out to be. It has not lived up to the hype or caught fire very quickly," said Ashish Gupta, MD, Helion Venture Partners.Helion has made two investments in internet companies (Komli and makemytrip.com) and two in mobile VAS (JiGrahak Mobility Solutions and Kirusa) since it closed its $140 million fund last August.

According to data from Venture Intelligence, Internet & Mobile VAS companies have accounted for only 13% of the VC investments (by value) in the first eight months of 2007 as against 38% during the same period in 2006. In terms of number of deals, Internet & Mobile VAS companies have accounted for 25% of the deals in 2007 compared to 31% in the first eight months of 2006.

This trend is not surprising since, since despite a lot of cheerleading in the Indian blogosphere, the fact is that there are hardly any truly Indian Internet and Mobile VAS applications have gained traction globally. At best, there are some companies - like Slideshare, Zoho and Mobio) - with founders of Indian origin based in the US and do some back-end development work in India.

Arun Natarajan is the Founder & CEO of Venture Intelligence, the leading provider of information and networking services to the private equity and venture capital ecosystem in India. View free samples of Venture Intelligence newsletters and reports.