I think India will be affected more than what we have seen so far. Everybody feels that they are the better fund and in India that’s particularly the case because nobody has results. All we have are portfolios and companies that we are working with. In the US, it’s easy. If you look at people’s returns over the years, you can see who is good and who is not good. But in India that’s not the case, so it makes it much harder. And that’s where the experienced LPs in the US are able to tell the difference, see the early signs. Now it’ll really show if you’re good or not because ultimately the vote will come from the LP.
...Yes, we have made capital calls since then and we are pretty fortunate. We had a meeting with all our LPs a month back. Our view is it’s a better time to fund companies now than two years back. We have gone over our strategy with our LPs, they are all on board with what we’re doing now. We may not put in as much. We may have given the company $10 million a year ago, and now we’ll only give five. But we’re definitely still talking to the good entrepreneurs.
...I think we’ll see fewer deals next year, fewer active venture funds. Some funds will discontinue, get pushed back by the LPs. The quality of deals is much better, compared with that two years ago. But no matter what entrepreneurs say about early stage or not early stage, valuations will be down. In the first half of 2008, there was a lot of euphoria. We didn’t do any deals the first six months because valuations were out of line. People have done too many deals in the first nine months. In dollar terms, I think (in 2009), it will be 50% of what VCs invested this year.
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. Email the author at firstname.lastname@example.org