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September 07, 2011

Businessworld cover story on Venture Capital

From the cover story profiling 7 leading VC firms: Helion Ventures, Nexus Ventures, IndoUS Ventures, IDG Ventures India, Accel India, Inventus Capital and Canaan Partners.
During 2004-10, venture capitalists invested $3.96 billion in Indian startups. Another $621 million has been invested this year, according to Chennai-based research firm Venture Intelligence. There is an established line of VC firms who have consistently invested through this period. Some are local arms of Silicon Valley firms such as Norwest Venture Partners and Draper Fisher Jurvetson. Others, such as Helion Venture Partners and Inventus Capital Partners, are independent startups themselves. By 2015, total investments will touch $10 billion, projects Bangalore-based VC firm IDG Ventures India.

...The numbers underline a few important facts about the Indian startup economy. First, there is enough innovation at the startup level to encourage risk capital to make bets over a sustained period. Second, if VC investments are advancing towards the $10-billion mark, investors clearly see many more latent pockets of innovation. So far, the money has gone into myriad sectors including e-commerce, consumer services and clean tech. The net will be cast wider into areas such as cloud computing, mobile infrastructure services, healthcare, education and rural businesses.

The mood in the VC industry, as BW found speaking to 15-odd investors, is unmistakably upbeat. Confidence levels are up as several move close to completing a full investing cycle with their debut funds, an event that is itself a milestone. The last major VC outing in India ended in the dotcom bust of 2000-01 and investors retreated from the market nursing huge losses. Much of the renewed confidence has to do with the kind of entrepreneurs leading the current charge of startup activity. “The need to address the customer and the market, and not just focus on the technology or product has become internalised with entrepreneurs,” says Samir Kumar, co-founder and managing director of Bangalore-based Inventus. Another big factor is that most VC firms that sprung up after 2004 have successfully raised second funds or are well on their way. This means the startups that have been funded so far have access to follow-on funding. The dotcom bust saw several startups die because their investors had run out of cash.

Venture Intelligence is the leading provider of data and analysis on private equity, venture capital and M&A deals in India. View free samples of Venture Intelligence newsletters and reports.